If Fannie Mae and Freddie Mac are involved its probably true.
Posted on 09/26/2010 12:18:55 PM PDT by Lorianne
A new wave of distressed home sales is rippling, more quietly this time, through American cities and suburbs.
Its unsettling effects are playing out here in Manassas, along Brewer Creek Place, a modest, horseshoe-shaped street lined with 98 brick townhouses. Several years after the U.S. foreclosure crisis erupted, the U-Hauls are back.
The last time, banks seized nearly every fourth house on the street through foreclosure. This time, homeowners are going another route: a short sale.
Completed short sales have more than tripled since 2008, and 400,000 of these deals are projected to close this year, according to mortgage research firm CoreLogic. The giant mortgage financier Fannie Mae approved short sales on 36,534 home loans it owned in the first half of the year, nearly triple the number in 2007 and 2008 combined. Freddie Mac, its sister company, approved 22,117 in the first half of 2010, up from a mere 94 in the first half of 2007.
Distressed homeowners are being drawn to short sales in large part because they can help protect a borrower's credit rating and thus the chance of buying another home later on.
"I worked hard for a long time to keep my credit score close to perfect, and I know a foreclosure would be much worse for my credit than a short sale," said Harris, who listed her Brewer Creek Place home as a short sale about a month ago. "If there's a chance we can avoid foreclosure, we'd rather do that."
In a short sale, homeowners must get the go-ahead from the mortgage lender. Sometimes that happens before the property is put on the market, and other times before the deal closes.
(Excerpt) Read more at washingtonpost.com ...
This video says that the taxpayers are again getttn hosed on these 'short sales'. Anyone know if that is true?
If Fannie Mae and Freddie Mac are involved its probably true.
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Could be unless the banks are writing off the loss as bad debt.
We just bought a short sale (nightmare) the first was $400K, the second $75K. The bank accepted our offer of $415K. It was the only offer and the place had been on the market for about six months, the owner had stopped paying about two months before our offer.
It took from April 14 (day they except the offer until August 24 to close.
You would have thought the bank who owned both the first and second and not being paid on either would have wanted to settle as fast as possible but nooooooo.
Short sales are a pain in the batoot.
Depending on how long one has been making mortgage payments, the amount of the *earnest money*, the down payment, termite inspections, appraisal, title searches, atty fees, closing costs etc., the lender may have already seen a profit.
If the banks had any sense, they would let a new (qualified) buyer take over the existing mortgage, minus those exorbitant fees.
Is it true? Take the simple test...
Do you pay taxes?
If yes, are you in the protected ruling class?
If no, you are getting hosed.
Use your head... who is screwing who?
anglian brought this up on another thread, which I read today and was highly ticked off about:
See this. This is just an amazing story that fellow realtor Frank Bellardo posted a few weeks ago.
Basically, IndyMac Bank (now OneWest Bank), is holding clients hostage, demanding a promissory notes, or they will proceed to foreclosure. For the life of me, I couldn’t figure out why they were doing this. What advantage could there possibly be for them to proceed to foreclosure?
Yesterday, I figured it out. You see, IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009. Guess who the investors are behind OneWest? George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire).
Now, listen to the deal they got from the FDIC….
Basically, they purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts). They purchased all current HELOCS at 58% of Par Value!!!
Next, in order to “sweeten the pot”, the FDIC stepped in and guaranteed the following: For any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss. The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan. Let’s use my clients situation as an example:
if the Loan Amount is $478,000, plus 6 months of missed payments, for a grand total of $485,200. OneWest pays $334,600 for the loan. We have an all cash offer of $241,000, net to OneWest. So, let’s do the math, shall we?
The net loss, according to the FDIC formula is the ORIGINAL LOAN AMOUNT minus the amount of the offer. In this case, $485,200-$241,000, or $244,200. Next, the FDIC, according to their Loss Share Agreement, writes a check to OneWest for 80% of the so-called “net loss”. So, in this case, OneWest gets a check from Uncle Sam for $195,360 (.80 X $244,200).
Add the $195,360 to the sales price of $241,000, and you get a grand total of $436,360. Remember, OneWest paid $334,600 for the loan. So, OneWest puts $101,760 in their pocket, thanks to the FDIC. Folks, that is over $100k of our hard-earned tax dollars!
So, you ask…Why does this program hurt short sales? Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES! The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO’s, upkeep, utilities/maintenance, legal fees, etc.)
So, If I’m OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure? And we wonder why nobody can get a Loan Modification? Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k? And, to add injury to insult, they have held this loan for 6 months! Not a bad ROI, huh?
What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE! Imagine if they could make $100k, then get a deficiency judgement! Talk about making some big bucks! Can you say “GREED”?
The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC. Some of them include: Bank of America (go figure), CitiMortgage, Wells Fargo, etc.
This entire agreement between the FDIC and OneWest can be found here, on the FDIC website. It’s all there, for the world to see! They have it all layed out. All of the formulas, worksheets, etc.
Wait, it gets better…The FDIC just announced that it needs to start borrowing money from the U.S. Treasury in order to replenish it’s deposit insurance fund (the same fund being used to pay all of these banks in the Loss Share Agreements).
http://arroyosecohomes.org/2009/12/07/it-pays-to-be-a-political-donor/
I dunno about this. As I understand it, if you “short sell” your home for less than your mortgage, yes you need the permission of the company that holds the paper, but I am almost certain that you get a 1099 for the balance they forgive, and get to claim all of it as ordinary income in the year you closed the deal. That may be underwritten in some way I do not understand, but the former mortgagee does not get a free pass in this.
For example. Your house has a $250,000 mortgage, and your lender agrees to a short sale of $175,000 and you closed the deal on August 20, 2010. You should expect a Form 1099 showing Ordinary Income from that sale in the amount of $75,000 which you will have to claim as income when you file your 2010 tax return next April and will pay income taxes on it. If you don’t have enough tax withheld in advance, you will likely be subject to prepayment penalties and interest on any taxes that you owe.
If I’m wrong about that it would be due to a change in tax law as it has been applied in the past. I don’t claim this as gospel, but if it changed I’d like to know definitively when and how...
“This video says that the taxpayers are again getttn hosed on these ‘short sales’. Anyone know if that is true?
If Fannie Mae and Freddie Mac are involved its probably true. “
For sure. There are people on the other end of these mortgages (i.e., investors) that sure as heck expect to be paid in full, with interest. With short sales, that doesn’t happen - someone eats it. If Fannie/Freddie has to make up the difference, guess who gets screwed.
“If the banks had any sense, they would let a new (qualified) buyer take over the existing mortgage, minus those exorbitant fees.”
Those were the old days. Back when a mortgage balance used to be paid down. Now it’s reversed and often the balance is much more than the original loan.
Bottom line - there aren’t any suckers left to take over payments on terrible loans. Those people will simply pass over and look at the next house.
If you see SHORT SALE with Freddie or Fannie involved, good luck getting a yes or no answer (as the old song goes) “In the Year 2525”...
The housing was always going to drop to true market value.
Short sales are a pain in the rear. I got fed up with the process and finally went and bought my house for cash off the courthouse steps (real foreclosure). In my extremely depressed area, the banks are holding on to properties forever it seems, there are people living in houses that have not made a mortgage payment in a couple of years. The process drags on and on. According to a banker freeper, this is on purpose, since as soon as the property is actually sold, it becomes a loss, whereas prior to the sale, it is still an asset and can be “valued” at the mortgage value. Around these parts, houses are going for about 20% of the mortgage (some houses).
Check this out. It's true, in more ways than one.
ping for info for later. Thanks
There’s a domino effect to short sales and foreclosures. On average, a short sale loses 17% less for a bank than a foreclosure because of legal costs. The domino effect is that the other people in the area will find their homes value drop like a rock because “distressed” homes sell for 25-30% less than a traditional sale. Appraisers are now being forced to use these as comps because there are so many and the banks(their boss)insists.
Right now, this country is at an all time high in regard to 2 months + behind in mortgage payments. At 4 months, foreclosure proceedings begin. It’ll be quite some time before the bottom is hit in prices.
Well that’s interesting...the rich are getting richer thanks to the rats in power.
Thanks for posting this!
That happens if you took cash. I just bought a short sale. The first 400K the second 75K. Because the bank accepted our offer the previous owner will get a 1099 for 60K as ordinary income because she took cash out. She was given a 100% loan for 400K, then took cash out two years ago for 75K. In the two year almost nothing was paid towards principle, hence she still owed 475K total.
We made a bid on a short sale and both realtors told us the guy was still paying, so the likelihood of a response was pretty much nil. So we've put in another bid on a different place.
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