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Short Sales May Stop Some Foreclosures According to St Louis Mortgage and Lending Experts
Our economy, particularly the housing industry, has been deeply badgered by large amounts of job losses, foreclosures and home values being decimated as if by overnight.
The bitter truths have shown that a meager 4 percent of homeowners on a national basis that faced foreclosure within the last year did receive mortgage assistance.
This has created a whirlwind of lawmakers trying to explore financial alternatives within the Obama administration aimed at helping the remaining 96 percent who may still lose their homes.
Demographics are showing that approximately two million homes and other real estate elements are falling into foreclosure or are bank-owned with more losses coming.
The government overall has been unproductive at saving homes from foreclosure. Sadly, the worse is yet to come according to Citigroup experts. Most financial analysts predict that there will be an increase of 8 million or more foreclosures in 2010 to 2011.
Which brings us to the subject of short sales. There was approximately 500,000 home sales in 2009 that were filed as short sales. The National Association of Realtors said this was close to 10 percent of homes sold for the entire year.
What seems to have caught many by surprise is the about face attitude banks have adopted in that they are now readily accepting short sales in an increasing amount.
Further data shows that short sales almost tripled to 40,000 in the first six months of 2009, compared to the same months in 2008 as reported by the St. Louis Refinancing Group and the local lending community.
This is later contrasted by the Office of Thrift Supervision and the Office of the Comptroller of the Currency reporting 25 foreclosures started or completed for each filed short sale.
”It’s really finally dawning on banks that they’re better off with a short sale,” said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles. Mr. Green continues: ”I think banks were in denial.”
What the average consumer doesn’t realize is that there are definite benefits in doing a short sale. First they remain in control of the sale and ultimately spare themselves the social stigma of going through a foreclosure.
And if your mortgage payments were never 30 days late and the lender didn’t require you to pay back the loan, you would be allowed to purchase a future home after said short sale occurred according to Fannie Mae guidelines either immediately or after a waiting period of no more than 3 years.
The worst case scenario involving a short sale is if you were behind on your mortgage payment by 30 days or more, you and your family may indeed qualify to buy a future Fannie Mae backed mortgage possibly within two years.
But what if you were a victim of foreclosure? Do not despair. Even with restrictions in place, you may qualify to by another home within 5 years and if there’s no restrictions in place, within 7 years.
And for investors who do not occupy the home as their primary residence would have to wait 7 years for a Fannie Mae insured loan.
The market is changing mainly brought on by political pressure. Hence, the Obama administration is now advocating short sales as an alternative to imminent foreclosure.
The Treasury Department has taken steps towards finalizing guidelines employing the use of short sales under the Making Homes Affordable program.
The administration has also appealed to participating servicers under the new Home Affordable Foreclosure Alternative (HAFA) program to embrace the short sale as a substitute to foreclosure.
This needed program has been implemented for homeowners who do not qualify for a loan modification under the Home Affordable Modification Program (HAMP).
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