The lenders have received numerous requests for loan modifications.
But many borrowers don’t qualify, for various reasons:
1. Too far underwater.
2. Lousy financial package (make too much $$, make too little $$, incomplete pkg., etc.).
3. Not primary residence.
4. Not a qualified loan program (not Fannie/Freddie, etc.).
The lenders/servicers are having to review each package, order appraisals, and make a decision.
If the borrower is denied, they are faced with either keeping their word and making their existing payments, or throwing in the towel. The second choice means ride out the free rent while getting foreclosed, or try for a short sale.
Both options will be costly to the lender.
The lenders have the loan mod package in front of them. If denied, should they just go ahead and pre-approve the short sale?
On one hand, if they were proactive and offered a pre-approved short sale, they could efficiently resolve the case.
If part of the package included a demand that the seller had to vacate, the short sales could compete with REOs – right now the REOs are pummeling the short sales in selling efficiency.
Selling these homes faster and easier should mean more net proceeds to the sellers.
On the other hand, wouldn’t more borrowers take advantage of the system?
I think there are lenders out there that are contemplating this very question.
What should they do?
Didn’t we talk about this at your birthday party?
My opinion at the time and remains is that in this market a good decision now beats even the very best decision later.
Do any of you know where this is?Somebody lost their @ss bigtime.
http://www.youtube.com/watch?v=qvrc7x3Amps&annotation_id=annotation_569411&feature=iv
This whole short sale scam is getting ridiculous.Seems like all you have to do is prove a hardship and the bank gets to eat all your losses.If this system is not made more credible look for every speculator to jump on board to do a short sale.Seems like an easy way out for people who took on too much risk.Seems like half the listings up here in sacramento are short sellers trying to have the bank eat their losses.
Pass there two days ago and say this and my jaws drop.
I figure it was a some type of building code issue but never though it was this. What is the advantage to the lender owner I don’t get this at all. Here a link for the Google map of location. http://maps.google.com/maps?hl=en&q=11984+bear+valley+rd+92392&sourceid=navclient-ff&ie=UTF8&split=0&gl=us&ei=eGD3SbnOGujgtgfCr9HtDw&ll=34.470317,-117.402112&spn=0.010349,0.016565&t=h&z=16&iwloc=A&layer=c&cbll=34.470324,-117.40244&panoid=igbHOObzZaD-hk5T5mX5CA&cbp=12,167.9438415075951,,0,5.408031088082903
Maybe a standardized short sale could be based on comps within 90 days, close in 30 days, 20% down. Essentially matching REO prices but there should be a little bump since the bank avoids foreclosure efforts.
Having people move-out would take the hostility and manipulation out of the sale, as we’ve seen in JtR’s videos, but would also seem to invite vandalism and further loss of value to the property and neighbors, as we’ve also seen in the videos. Let them stay for free as caretakers. Chump change at this point.
They’ll be punished credit-wise for whatever they think they are getting for free now.
They did tore down new, partially-developed tracts during the last downturn, too.
Actually the lender wins big if the borrower keeps their word and continues making payment. Imagine that!
If someone’s income is “too high”, that means they can pay. If they want to get out of paying because their “investment” is negative, they can simply offer better terms for a short sale. It’s not like they can’t afford the house in this scenario.
Although the process of trying to get approved for a short sale is not that different from trying to get a loan mod (hardship letter, income and debt, valuation, etc.), there are several practical reasons why these don’t get streamlined. Sometimes, there is a mortgage insurer involved and this may encourage the lender to foreclose. There are also sometimes issues about unsecured mortgage debt surviving a short sale so that the borrower remains on the hook. Sometimes obligations such as overdue HOA dues, judgments, 2nd liens, etc. that get wiped out in foreclosure complicate short sales. I don’t think short sale selling efficiency could ever compare to REO selling efficiency.
such a waste sell these houses for a buck to habitat for humanity
JtR,
Quick question. I heard of someone who is recently in escrow for a new home, and the builder slashed prices on similar homes before escrow closed.
What does a buyer in todays market have as recourse when this happens to protect their “to be” new home during escrow?
That’s a tough one – I think the only recourse is to not buy, and you may lose your deposit to boot.
Builders are crazy to not accomodate their existing customers – do a little something for them too. The meltdown at Vantage Point is a prime example – I’ve been following it, and it is disasterous.
The builder is turning it’s back on at least a hundred buyers who ponied up $25,000 deposits, and instead is going to lease out 40 stories?
Jim,
I live in Pacific Beach and several of the renters in the complex where I live have moved downtown recently. The reason was builders looking to rent out units are offering the same price apartments cost in PB. They have to be losing bigtime and just wait until they have to replace everything on the inside after the “beach people” move out.
All this just to live another day by not realizing the loss and selling at market rates.
shadash,
The overall rent trend seems to match your anecdotal evidence. Article in the UT on April 23 noted that local rents declined for the first time ever (in 22 years of tracking) and vacancies are at 15 year highs:
http://www3.signonsandiego.com/stories/2009/apr/23/1n23rent004611-apartment-rents-fall-vacancies-are-/
Beach people + gaslamp bars = one big party that’ll last forever. Add in a growing homeless population….
Naw, let’s put off selling 1,000s of condos!
I advocate a pre-approved buyer bidding system for pre-foreclosure homes. The banks would know how much buyers are willing to pay for a specific home and then could make their decision.
I love that idea.
As part of the agreement to consider a short sale, the sellers vacate for a weekend of open houses, and then bidders can submit their price directly to the banks via on-line…….wait a minute, what about the realtors?
For the life of me I cannot understand lenders unwillingness to do more “deed in lieu” deals. Deals can be done where lender accepts deed in lieu in exchange for agreement allowing borrower to remain on property at a very low rent, and borrower further agrees to maintain property in good condition until resold by lender, etc. It is being done, but rarely. Did several of these in the 90’s and lenders did very well. Sold properties for loan balance and got rid of them fast. Stupidity and bureaucracy are killing the lenders.
If I were a lender, I’d stick my head in the sand and pretend like there’s no issue and that my bank is solvent when it isn’t.
Since they’re already doing that, I guess they don’t need my advice on what to do. 🙂
wait a minute, what about the realtors?
Somebody has to bake cookies for the open houses!
wait a minute, what about the realtors?
If the front door is locked somebody has to jump the fence!
The thing with Short sales is that the lenders are very hesitant to do anything for the borrower until they stop making their payments. So for anyone thinking to do a short sale, they need to first stop making their payments, second, send the hardship package to the lender and tell’em to knock 200-300k off of the principle and refi it as a fixed 30yr or you walk and then wait for your loan mod to come in!!! and if they won’t offer you anything then list it on the MLS and get a straw buyer to put in a low offer and re-buy your house back. works like a charm and you get to lower your assessed tax base!!!
The sucky part is, what bubba wrote is exactly what’s going on right now. 🙁