Although the Obama administration continues to search for a solution for homeowners facing foreclosure, the reality of the situation is only about 4 percent of these at-risk homeowners receive long-term mortgage help, according to a recent report by CNN.com.
Nearly 2 million housing units in the United States are in foreclosure or are bank-owned, and more are expected to follow, RealtyTrac said. Citigroup experts say the government’s current solutions have been ineffective at keeping people in their homes, and they anticipate lenders could foreclose on another 8 million loans as the economy worsens.
With foreclosures on the rise, homeowners are looking for a viable solution to their problems. Housing Assist of America, a real estate company specializing in short sales,
said when compared to foreclosures, short sales are clearly the better route. According to the National Association of Realtors, almost 500,000 transactions in 2009 were short sales, representing almost 10 percent of all home sales.
Banks are beginning to go along with short sales in increasing numbers, three years into a U.S. housing slump that pushed the economy into a recession and cut resale values by 30 percent from the peak in July 2006, a recent article on Bloomberg.com said. According to the article, short sales almost tripled to 40,000 in the first six months of 2009, compared to the same months in 2008. However, in the first half of 2009, there were 25 foreclosures started or completed for each short sale transaction, according to data from the Office of Thrift Supervision and the Office of the Comptroller of the Currency.
“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. “I think banks were in denial.”
The Obama administration is also advocating short sales as an alternative to foreclosure. As DSNews.com reported, the Treasury Department recently laid out finalized guidelines for carrying out short sales under the Making Homes Affordable program. Under the Home Affordable Foreclosure Alternative (HAFA) program, the administration is urging participating servicers to follow through with short sales as an alternative to foreclosure for homeowners who do not qualify for a modification under the Home Affordable Modification Program (HAMP).
In an effort to help rebuild American communities devastated by the foreclosure crisis, the National Association of Realtors (NAR), a trade association with 1.2
million members, has partnered with the National Community Stabilization Trust (NCST), a nonprofit organization that facilitates the transfer of foreclosed and abandoned properties from financial intuitions to local housing organizations.
This collaboration will bring more than 1,400 state and local Realtor associations into a side-by-side relationship with leading nonprofits and state and local leaders to develop comprehensive and targeted plans to help bring stabilization to struggling neighborhoods. The partnership was made possible by the new federal Neighborhood Stabilization Program, which provides $6 billion in funding to reclaim neighborhoods permeated by high levels of foreclosed and abandoned property, property disinvestment, low prices, and low resident confidence.
“Realtors build communities and have the market expertise and property transaction tools to help local housing organizations understand local market conditions and how to put foreclosed houses back into the hands of stable homeowners,” said Vicki Cox Golder, NAR president. “Working in this partnership with NCST gives Realtors a seat at the community table to perform a leadership role in restoring vitality to communities across this great nation.”
As part of NAR’s Foreclosure Prevention & Response Program, Realtors have been engaged in foreclosure prevention efforts since early 2009. Over the past year, Golder said many state and local Realtor associations have shown outstanding leadership and have become active participants in community problem solving, proving that Realtors are a valuable local community partner.
“Neighborhoods across America have been decimated by high concentrations of abandoned and foreclosed homes. To reverse neighborhood decline, we need the Realtor community working hand in hand with other housing providers,” said Craig Nickerson, president of NCST. “This ambitious new campaign will harness the unique abilities of Realtors to remarket newly renovated homes and to rebrand the tarnished image of hard-hit neighborhoods.”
NAR and the NCST will be working nationwide on this new initiative, but a focus will be placed on enhancing capacity in states experiencing the highest level of foreclosure and abandonment. Based on severity of foreclosure problems, NAR began initiating contact with targeted state associations on January 27. In addition, in-depth training and education materials developed and provided by NCST will be available on NAR’s Web site.
Fannie Mae says it will cover the closing costs on purchases of its REO homes – an incentive the GSE hopes will help it pare down a bloated supply of repossessed foreclosed properties.
The nation’s largest mortgage financier has announced a temporary seller-assistance program under which people purchasing a property through HomePath, Fannie Mae’s REO disposition operation, will receive up to 3.5 percent of the final sales price, which can be applied toward closing costs or used to purchase appliances for their new home.
The offer is available to any owner-occupant who closes on the purchase of a property listed on HomePath.com before May 1, 2010, the company said. In addition, many Fannie
Mae-owned properties are eligible for special HomePath Mortgage and HomePath Renovation Mortgage financing, with as little as 3 percent down.
“Attracting qualified buyers to the market and reducing the inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover,” said Terry Edwards, EVP of credit portfolio management for Fannie Mae. “Many families are taking advantage of the federal homebuyer tax credit to buy a new home so this is a great time for Fannie Mae to offer some additional help.”
Recent data from Fannie Mae show an increase in the acquisition of foreclosed properties and an escalating rate of seriously delinquent loans, which means even larger volumes of REOs could be coming down the pipeline.
According to the GSE’s most recent quarterly filing, Fannie Mae acquired 98,428 homes through foreclosure during the first nine months of last year and sold 89,691 REO properties during the same period. But at the end of September, Fannie Mae still had 72,275 REO properties on its books, marking a 7 percent increase year-over-year.
Furthermore, Fannie Mae’s monthly summary shows significant growth in seriously delinquent single-family mortgages held or guaranteed by the company. Up from 2.13 percent in November 2008, loans three or more months behind in payments or in the foreclosure process soared to 5.29 percent in November 2009.
Equator, a technology provider for the default servicing industry headquartered in Los Angeles, California, has announced the launch of its new agent-initiated short sale feature. The new feature gives agents the ability to request a short sale on behalf of their homeowner clients, initially bypassing the lender to open up the process on their own.
“Traditionally, requesting a short sale meant borrowers had to call their lender, which was often a time-consuming process,” explained Chris Saitta, CEO of Equator. “Agents can now provide the additional service of requesting a short sale directly through Equator.”
Saitta says agent initiation makes the progression easier for both the borrower and the lender, and brings short sales to fruition in dramatically less time.
“Equator’s solution provides a borrower self -service portal where borrowers can upload financials and receive real-time status updates,” Saitta said. “It automates every step of the lender’s internal process facilitating valuation and approvals while monitoring the eventual sale.”
Saitta says many of the industry’s top lenders and servicers are either using or adopting Equator’s short sale solution, and the system has already started accepting agent-initiated short sales for a large national lender.
“Short sales are a great alternative to foreclosures, but without a comprehensive automation solution many have simply avoided them,” Saitta explained. “Equator’s platform removes these barriers to entry and allows everyone to realize the benefits of short sale.”
Lenders have the option to enable the new agent initiation feature. According to Saitta, agent initiation helps lenders by lowering their call volumes and involving their decision-makers quicker so they can be more responsive. Final determination of whether the property in question qualifies as a short sale is at the discretion of the lender or servicer.
Equator has handled more than $113 billion in default-property transactions. The company says with its configurable EQ workstation, EQ marketplace, and new “self-service” borrower portal, Equator is the preferred platform for seven of the top 10 lenders and servicers nationwide.
In addition to its headquarters in Los Angeles, Equator maintains field offices in Irvine, California; Dallas, Texas; and Denver, Colorado.