Most of us have read the Treasury Department's new Homeowner Affordability and Stability Plan
After reading the plan, with details to be unveiled on March 4, I want to know- "How will the plan affect Short Sales? " Most of the plan is focused on aiding homeowners whose primary residence is at risk of foreclosure. Not everyone will be helped by this plan. Some of those who won't may include homeowners with loans not guaranteed by Fannie Mae or Freddie Mac. Many have lost jobs or have lost so much income they would not qualify. Other owners may have rental properties that cannot be sustained. In my area on the Emerald Coast of Florida, military families from Eglin Air Force Base or Hurlburt Field are required to relocate to change bases. These airmen often keep their past residence as a rental property. Now they are losing tenants. Why? Many unsold homes go on the rental market. Thus rental rates have declined significantly due to the oversupply of these properties. They can no longer cover their mortgage payments. There are also investors who were not "flippers". They might have saved their whole lives to buy a condo in Destin, to find that the resort-rental market has declined by 35%. There is no aid to them in the plan. Many areas in Florida and other parts of the country have economies that depend on tourism and the resort industry. Those who will not be assisted by the plan will have to resort to their best alternative, a short sale, or worse, foreclosure.
The Treasury Department states the Homeowner Affordability and Stability Plan will be effective because it will, among other things, limit "the Impact of Foreclosure When Modification Doesn't Work: Lenders will receive incentives to take alternatives to foreclosures, like short sales or taking of deeds in lieu of foreclosure. "
In my opinion, to receive incentives to approve short sale, banks must be required to:
- Shorten approval time frames to 30 days
- Require second mortgage holders to accept a set amount, such as $3000, to release their lien
- Consider incentives for approving investment properties that meet certain criteria, as mentioned above
- NOT report a "charge off" or "settled for less" to credit reporting bureaus
Further, I believe all who have had short sales should have credit reports revamped to remove the negative impact of the event. If they don't, perhaps only 10% of borrowers might qualify for a loan at the best rates! If the government is "intervening" at all, then do it right. Thus far, the banks have done little to reduce the backlog of short sales and free up credit. If they are just given an "incentive" without definitive guidelines, then we might expect to see more of the same.
It's Wendy!
Wendy Rulnick, Broker, CRP, CRS, GRI, ABR Rulnick Realty, Inc.
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Wendy Rulnick specializes in real estate sales, short sales, traditional sales on Emerald Coast of Florida: Destin Florida real estate, Santa Rosa Beach, Fort Walton Beach, Niceville, Bluewater Bay, Navarre, Seagrove Beach, Watercolor, Sandestin, Seaside, Dune Allen, Blue Mountain Beach, Crestview, Freeport, Rosemary Beach, Mary Esther, Shalimar, Eglin AFB, Hurlburt Field. Wendy Rulnick, Broker and Realtor, has been selling real estate for 20 years. She has won numerous awards, including the coveted ADDY for advertising design. An expert marketer of real estate, Wendy is in the top ½ percent resale agents on the Emerald Coast, and was featured in Kiplinger Personal Finance Magazine as a short sale specialist.
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Isn't part of what they promised was too put pressure on lenders to work harder to expedite the short sale process?
Bill - They better! I have read what was published thus far, and the only mention I could find was what I quoted above.
these are all great ideas, let's see what comes out of it. The vascillating second approvals are key. I have seen first OFFER $24K on a $50K loan and seen firsts refuse to give more than $1K on a $100K 2nd. They are all over the place and surely are part of the bottleneck. I have mixed views on the credit reporting and see both sides of the coin.
Wendy, excellent suggestions. Unfortunately, the government doesn't usually ask the experts what will work. If they did, much of what you suggested would already be in place. As always, your insight into this market is greatly appreciated.
If only they could read....understand and really negotiate...or better yet...listen to the folks in the trenches...
Janie - Seconds and Firsts are certainley deal-killers! If no adjustments are made to credit reports, 550 will be the new standard :)
Laura - Thank you. I am writing congress, senator and committees today!
Sally & David - Correct! The banks AND the gov!
WENDY,
I don't think there will be a significant effect from this program. There were two things I read that made me shudder. First, the lenders will be "encouraged" to participate. As we saw with the HopeNow Alliance and the Hope for Homeowners program, if the lenders can "opt in" to help then there really isn't an incentive to help the ones that need it the most. The second was the notion of refinancing only up to 105% of the home value. That would have been great in 2007, but with price drops of 50% or more, how many will really qualify for this?
They want to fix this? Two things are a must. Make changes to the principal to bring down the monthly payments. The second would be to make all the modifications permanent and not a 3 or 5 year stop gap.
But that's me.
Sidney - I also "shuddered" at the fact that the proposal said the "government" would contribute to the losses incurred on the lowered mortgage payments. The "government" was repeated again and again. The "government" is not the "government". It is the taxpayers. I DO think there will be participation from lenders because the GOVERNMENT will be giving them money. N(Uhh I mean the working taxpayers.)
Also, I shudder because the TAXPAYERS will also reward those who make their payments by giving them money! The plan says "As long as the borrower stays current on his or her payments, he or she can get up to $1,000 each year for five years." No one should be given a carrot to do what they are obligated to do by contract. The taxpayers should be up in arms about that!
Wendy - your suggestion to shorten approval times to 30 days would make a huge difference. As I have told you, I am just getting into short sales, waiting 2 or 3 months for an answer is outrageous.
Wendy, intelligent addition, and thanks for the outline. It's alarming to see the variety of solutions they've proposed and implemented, as we as professionals try to navigate our business accordingly, only to watch the governments paper-thin plans fail.
I hope these new additions make a difference, especially with the short sales. That's 98% of what we do right now, and luckily, through all of this, we've been able to tweak our systems to be as efficient as the banks will allow, and then some. We're closing almost 2 deals a day on average, and don't show any signs of slowing soon; all this might actually speed things up.
Thanks for keeping us abreast...I'm sure it's just as bad out there in FL as it is here in AZ.
Tracy Royce
www.LiveFreeInvestmentgroup.com
602-957-7773
Virginia - Thank you. I sent my suggestions to one of our Florida senators, but should also send to other government entities. Sometimes Countrywide is FOUR-FIVE months.
Tracy - I am anxiously awaiting details. Exactly "what" incentives for lenders to approve? And WHAT exactly did they do with all the bailout money they already got? Prices will start to stabilize if short sales are processed in a timely manner, and other changes, like a fixed amount to the second!