Posted on 04/16/2010 9:52:14 AM PDT by Notary Sojac
TAMPA - The government launched a new effort on Monday to speed up the time-consuming, often-frustrating process of selling your home if you owe more than it's worth.
The Obama administration will give $3,000 for moving expenses to homeowners who complete such a sale—known as a short sale—or agree to turn over the deed of the property to the lender.
It's designed for homeowners who are in financial trouble but don't qualify for the administration's $75 billion mortgage modification program.
Owners will still lose their homes, but a short sale or deed in lieu of foreclosure doesn't hurt a borrower's credit score for as much time as a foreclosure.
For lenders, a home usually fetches more money in a short sale than a foreclosure. And the bank avoids expensive legal bills, cleanup fees and maintenance costs that follow a foreclosure.
''It's very traumatic and embarrassing and frustrating to go through a foreclosure,'' said Laurie Maggiano, policy director of the Treasury Department's homeownership preservation office. With a short sale, she said, ''your financial issues are your own problem and not neighborhood conversation.''
Falling home prices and lost jobs have forced many sellers into this position. For example, in Orange County, Calif., short sales made up about 26 percent of the market in March, compared with 17 percent a year earlier, according to data complied by Altera Real Estate, a local brokerage.
In the Minneapolis-St. Paul metro area, about 12 percent of all deals since October were short sales, up from about 8 percent a year earlier, according to the Minneapolis Area Association of Realtors.
The expanded incentives will help accelerate short sales, said Mark Zandi, chief economist at Moody's Analytics. He expects 350,000 homeowners nationwide to use the program through the end of 2012, more than double his earlier forecast.
A short sale appears to be the only way out for Brandee Chambers, 36, of Las Vegas. She got into trouble during the housing boom by taking out a risky loan against her home and using the money to buy two investment properties in Phoenix.
She later lost those two properties to foreclosure, and now she is trying to sell the home she lives in for $209,000, but the mortgage balance is $350,000.
Chambers, who owns two hair salons, says she would rather stay in her home, where she lives with her 14-year old son. But she had no luck getting help with her loan. She said she's resigned to scaling back her lifestyle and renting out an apartment.
''I've had to accept a lot in the last year,'' she says.
For buyers, though, short sales can be a great opportunity.
Marco Cappelli, 49, a winemaker from Northern California, is planning to buy a short sale this month in the Sierra Nevada foothills. He and his wife are paying $214,000 for a property that had been listed at $270,000. They pair plan to fix it up, install a hot tub and rent it out to vacationers. Along with the financial incentives, the new government program makes another key change. Mortgage companies will have to set their minimum bid before the house is listed for sale. If the offer is above that, the lender must accept it.
That's a big change from current practice. Lenders generally don't calculate how much money they are willing to accept on a short sale until they have an offer in hand, causing long delays before the sale is approved.
The new program ''will give us a degree of efficiency that we have not had in the past,'' said Matt Vernon, Bank of America's executive in charge of short sales and foreclosed properties.
Under the new process, buyers who submit an offer to purchase a home in a short sale should get a response within two weeks, as opposed to months. If that happens as planned, it would be a big improvement. Real estate agents across the country have complained that lenders are often difficult to reach, sometimes only communicating by e-mail and infrequently at that.
''You're one of 400 properties on a screen,'' said Dave Bauer, a real estate agent in Danville, Calif.
Some real estate agents who specialize in short sales are optimistic. ''It could be the first government program that actually helps Las Vegas,'' said Steve Hawks, a real estate agent there who specializes in short sales. Most borrowers in Las Vegas, he said, owe so much more on their mortgages than their properties are worth they can't qualify for a loan modification.
The Treasury Department outlined the plan last November, but doubled the original $1,500 in relocation money after realizing that many homeowners need more cash to move out. That's because landlords usually want large deposits from people whose credit records have gone sour after missing mortgage payments.
However, there are plenty of restrictions. To qualify, the home needs to be a borrower's primary residence. Homeowners either have to be behind on their mortgages or on the verge of becoming delinquent.
Currently, the program is not available for mortgages owned or guaranteed by mortgage
finance companies Fannie Mae and Freddie Mac, though the two government-controlled companies will soon follow suit, said the Treasury's Maggiano.
She later lost those two properties to foreclosure, and now she is trying to sell the home she lives in for $209,000, but the mortgage balance is $350,000.
Chambers, who owns two hair salons, says she would rather stay in her home, where she lives with her 14-year old son. But she had no luck getting help with her loan. She said she's resigned to scaling back her lifestyle and renting out an apartment.
''I've had to accept a lot in the last year,'' she says.
It’s stories like poor Brandee's that keep me up at night. I find the struggles she endured heartbreaking, and it keeps me up at night as I sit in our paid-for, modest two bedroom modular. She has to live like scum like me and work for money. Horrible, horrible.
Obama isn’t giving anyone money...we are.
“The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.’”— Ronald Reagan
THAT IS NOT THE DAMNED OBAMA ADMINISTRATION'S MONEY! THAT IS MY DAMNED MONEY!
What about people who bought stocks which are now worth less than what they paid? Is there a bailout program for other investments?
It’s surprising to me that we still have a mortgage industry, what with the government telling folks they don’t have to have any financial responsibility whatsoever, and then telling the public that lenders are selfish greedy leaches.
This is sounding more and more like Russia just prior to 1917.
Is Obama our Vladimir Lenin? Only time will tell.
“Is Obama our Vladimir Lenin?”
I would have guessed “Uncle Joe” Stalin, but that role is probably reserved for Soros.
We are seeing the vilification of the pillars of capitalism right now. Obama is already directly dictating how over 50% of our prior private sector is being run. This is the quiet revolution almost consummated.
That’s why it seems to me he’s more like Lenin.
1985 Reagan: The nouveau riche
2010 Obama: Nouveau poor
Yeah, good point. I was thinking more of the purges, but admittedly am rusty at best on Russian history.
Oh I wouldn’t be surprised at all to see the purges come. He’s already caused people to be fired, wages reduced. Now he’s even belittling (laughing at, and making jokes at their expense) the populace like Hugo Chavez does.
This doesn’t lead to wholesome places.
As for Lenin and Russian history, I’m no expert myself. No problem.
Home owners don’t need incentives to do short sales. The banks are dragging their feet processing them. It took me seven months to finalize a buy with Countrywide.
Well said.
There’s an ongoing comments war going on in our local newspaper over Obamacare. The conservatives keep complaining that the government is giving our money to people who haven’t earned it. The “progressives” keep saying that it isn’t “our” money, it’s government money acquired through taxation. I must be dense, because I don’t understand the nuances. The government takes the money from my paycheck, keeps a big chunk, and gives the rest away.
I hope you forgot your sarcasm tag. She made a very risky move and lost. She is simply reaping what she sowed. I’d wager that a very high percentage of short sales are simply because of people not acting their wage.
And deserves the exact same amount of government help as someone who made a "risky move" in stocks, commodities,....or lotto tickets for that matter.
LOL...I usually TRY not to shout online, but that was EXACTLY what my brain screamed when I saw that snippet of text!
LOL...
To the “progressives” (spit) you ARE dense, alright.
Dumb ass conservatives can’t get it through their heads that their property (earnings, etc) belong to the COLLECTIVE, not to the individual.
Dumb Conservative. Tricks are for Pigs.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.