Finally, we have survived all the challenges of 2009 and some things have gotten better which fueled the rumors of an economic recovery. But what many people don't realize is that any inkling of positive change will set a comment about an economic recovery. More importantly, the recovery of the housing market is far from near. Yes some neighborhoods have seen some increase in prices, while others continue to decline but with the number of defaults expected next year, home values will continue to decrease.
The one positive fact that still holds true is that the demand for housing continues because people will always need housing. But homes will be hard to sell if you don't have all cash in the bank to pay for the home because lending guidelines are definitely not going to get easier. In fact, the FHA announced that they are adding costs and reducing credit score eligibility in order to mitigate its risk for future defaults.
So what makes this year different than the years of past? This year will be the peak for short sale opportunities. In previous years, the sub-prime loans went bad, then came the prime loans, now to add to the volume of foreclosures, 24+ billion dollars of adjustable mortgage resets will take place. If homeowners are having a tough time making payments prior to the reset, they definitely will be facing foreclosure. Also, there are many homeowners not in trouble that are walking away from their homes because they've lost so much equity in their home and find it's not investment savvy to stay and funnel money into a negative investment.
Now we don't need to get into the numbers of how many foreclosures to be filed in 2010. The only thing you need to know is that right now, it is estimated that 1 in 7 homeowners nationwide are late on their mortgage or are already facing foreclosure. The economy is not expected to boom with new jobs and people will continue to have a hard time paying their mortgage. Getting refinanced is impossible for many homeowners for the lack of sufficient income, assets, credit score, or the value of their home.
If you are a Real Estate Professional, you are hurting yourself by not pursuing short sale opportunities. If you had a previous client in trouble, would you be able to serve them? Would you just walk away and hope you find another client who isn't in trouble? If you are looking to stay in Real Estate, you'd better take the time to know how to deal with homeowners in trouble or you will be throwing away good commission dollars and decreasing your customer base you worked so hard earning.
Many analysts have predicted that short sales will only last until 2011, but the fact is it will be much longer. With limited help provided by the government and the economy failing to create enough jobs, more and more people will lose their homes. Look at how long it's taken to deal with sub-prime defaults, which started in 2005 and still count for a large part of today's foreclosure inventory in 2010.
Following are the short sale trends and Short Sale Secrets as of Dec 2009, heading into 2010, which will explain the challenges short sales in 2010 :
Trend #1 - Can't Pay Me Now, Then Pay Me Later.....Lenders are scrutinizing reasons for hardships and predicting future financial status
Lenders are still holding their ground and trying to recover as much as they can on a short sale deal. It's been a balance of holding too much REO (Real Estate Owned) inventory and recovery what they can through short sales. But lenders do not want to look like fools giving everyone who walks through the door the ability to just walk away from their financial obligation.
In order to prevent short sale approvals for homeowners who may really not be in trouble, lenders have been scrutinizing the reasons provided in a short sale submission. If you broke your leg and you missed a few months of work that caused you to be behind, but your ability to continue earning income when you recover shows to the lender you really don't have a real enough hardship to approve a short sale.
If it is seen that you have the ability to continue earning a good income when the economy picks, up, Lenders may approve a short sale pending a promissory note with a reasonable interest rate and payment plan in order to recoup losses from the sale. Lenders will try to do anything they can to recover any monies that were lost.
Many first mortgages are having the borrower sign a statement that the lenders will still have the right to seek deficiency. Most probably won't enforce their rights unless they see a compelling reason as to why they think you may be able to pay something in the future.
Getting short sales approved will be easier in 2010 because most lenders have had enough time to get their systems together to handle the high volume of foreclosures coming through their door, but they still need to stay in business and in order to do so, they need to get rid of their bad debt and recover as much money they can to continue operations.
Trend #2 Junior Lien holders get paid $3000 by the Senior Lien holder regardless of how much debt is owed
In most transactions when there are multiple lien holders and the first mortgage lender forecloses, Junior lien holders understand that they will receive nothing. Junior lien holders know this but also don't want to give up their hand that easily. Don't expect Junior lien holders to lay down so easily. In fact, short sale deals have died because the Junior lien holder wanted more than $3000, even when the first and second lenders where the same company!
Trend #3 Junior Lien holders gets borrowers to continue paying on payment plan
Junior lien holders are asking for a promissory note from the borrower if they want them to release the lien from their property and give up their rights to deficiency. The thought is that they will get $3000, and even if the borrower makes a few payments from the promissory note, it is still more money in their pocket. The payment plan is very reasonable with a long payment term with a very low rate.
Trend #4 Commission adjustments
The maximum lenders have been allowing on commissions is 3% for each agent involved. A full 6% commission is supposed to be allowed by FNMA backed loans but lenders may still scrutinize these commissions. In fact, the amount of commissions will most likely be affected if they are not able to recover enough money from a short sale offer. Be aware that if a deal has two separate agents from the same office, the commissions may be reduced.
Trend #5 Strict compliance of title companies for short sale transactions
Every Short Sale Secrets will need title insurance and there has been concern from title companies that a lender will take back an approval if the title company is not able to comply with their closing practices. If any mistakes are made by the title company, they would be paying out money on any future claims. Therefore, all requirements set by the lender must be met and any changes to the requirements will be addressed by the title company's legal department for approval as wells as being disclosed to the short sale lender. If not, insurance will not be provided for the deal.
Trend #6 Homeowners will continue to face foreclosure
This is an obvious trend, but the 24+ billion adjustable mortgages this year will add more inventory to the housing market. Values will continue to decline and lenders will be pressured to allow more short sale approvals to prevent additional inventory hitting the market and reducing the values of their REOs in the market.
Note: Short sale trends vary between different housing markets. Although some may seem to be recovering, a single foreclosure in a neighborhood can reduce values 25%. The foreclosure issues are nationwide and in every neighborhood with varied conditions.
Look out for our future blogs/articles from our Short Sale Leadership Series content.To view our blog updates, visit www.whbsolutions.com/blog.
Our website is not responsible for the information contained by this article. Webworldarticles.com is a free articles resource thus practically any visitor can submit an article. However if you notice any copyrighted material, please contact us and we will remove the article(s) in discussion right away.
This article was sent to us by:
Art Lee at
08042010
1. Does Your Banker Know Your Name
All articles in this directory are property of their respective authors. Additionally, read our Privacy Policy
© 2010 WebWorldarticles.com - All Rights Reserved. Partners: Gunblade Saga