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• Bank of America Permanent HAMP Modifications Increase 5.9% in July  housingwire.com)

RISMEDIA, August 13, 2010—Through the existing Housing Finance Agency (HFA) Innovation Fund for the Hardest Hit Housing Markets (the Hardest Hit Fund), the U.S. Department of the Treasury will make $2 billion of additional assistance available for HFA programs for homeowners struggling to make their mortgage payments due to unemployment. Additionally, the U.S. Department of Housing and Urban Development (HUD) will soon launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance—for up to 24 months—to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition.

“We remain committed to helping struggling homeowners, and this program will provide additional assistance to states hit hardest by unemployment,” said Assistant Secretary for Financial Stability Herb Allison. “This is part of the Administration’s comprehensive housing policy that has helped to stabilize a fragile housing market and allows responsible homeowners the chance to reduce their monthly mortgage payments to affordable levels.”

“HUD’s new Emergency Homeowner Loan Program will build on Treasury’s Hardest Hit initiative by targeting assistance to struggling unemployed homeowners in other hard hit areas to help them avoid preventable foreclosures,” said Bill Apgar, HUD senior advisor for Mortgage Finance. “Together, these initiatives represent a combined $3 billion investment that will ultimately impact a broad group of struggling borrowers across the country and in doing so further contribute to the Administration’s efforts to stabilize housing markets and communities across the country.”

Hardest Hit Fund
President Obama first announced the Hardest Hit Fund in February 2010 to allow states hit hard by the economic downturn flexibility in determining how to design and implement programs to meet the local challenges homeowners in their state are facing.

Under the additional assistance, states eligible to receive support have all experienced an unemployment rate at or above the national average over the past 12 months. Each state will use the funds for targeted unemployment programs that provide temporary assistance to eligible homeowners to help them pay their mortgage while they seek re-employment, additional employment or undertake job training.

States that have already benefited from previously announced assistance under the Hardest Hit Fund may use these additional resources to support the unemployment programs previously approved by Treasury or they may opt to implement a new unemployment program. States that do not currently have Hardest Hit Fund unemployment programs must submit proposals to Treasury by September 1, 2010 that, within established guidelines, meet the distinct needs of their state.

The states eligible to receive funds through this additional assistance, along with allocations based on their population sizes include:

Alabama – $60,672,471
California – $476,257,070
Florida – $238,864,755
Georgia – $126,650,987
Illinois – $166,352,726
Indiana – $82,762,859
Kentucky – $55,588,050
Michigan – $128,461,559
Mississippi – $38,036,950
Nevada – $34,056,581
New Jersey – $112,200,638
North Carolina – $120,874,221
Ohio – $148,728,864
Oregon – $49,294,215
Rhode Island – $13,570,770
South Carolina – $58,772,347
Tennessee – $81,128,260
Washington, D.C. – $7,726,678

HUD Emergency Homeowners Loan Program
This new program will complement Treasury’s Hardest Hit Fund by providing assistance to homeowners in hard hit local areas that may not be included in the hardest hit target states. These areas are still being determined.

The program will work through a variety of state and non-profit entities and will offer a declining balance, deferred payment “bridge loan” (zero percent interest, non-recourse, subordinate loan) for up to $50,000 to assist eligible borrowers with payments on their mortgage principal, interest, mortgage insurance, taxes and hazard insurance for up to 24 months.

Under the program, eligible borrowers must:

1. Be at least three months delinquent in their payments and have a reasonable likelihood of being able to resume repayment of their mortgage payments and related housing expenses within two years;

2. Have a mortgage property that is the principal residence of the borrower, and eligible borrowers may not own a second home;

3. Demonstrate a good payment record prior to the event that produced the reduction of income.

HUD will announce additional details, including the targeted communities and other program specifics when the program is officially launched in the coming weeks.

For more information, visit www.hud.gov.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  You can email me @  chance at ballard-company.com or http://www.myspace.com/chancegates

If you want to stay in your home, but you had trouble paying your mortgage and are now behind with your payments. There are options available to help you stay in your home.

Refinance:

A new loan—with new terms, interest rates and monthly
payments—that completely replaces your current
mortgage. Even if your home value has decreased, you may
be able to refinance your loan as part of the government’s
Home Affordable Refinance Program (HARP).
• Make your payment more affordable by lowering your
interest rate or adjusting the terms of your loan
• No negative impact to credit score
• Stay in your home and avoid foreclosure

Repayment Plan:

An agreement between you and your mortgage company
that lets you pay the past due amount on your mortgage
payments over a specifed time period in order to bring
your mortgage up to date.
• Catch up on your past due payments over an extended
period of time
• Less damaging to your credit score than a foreclosure
• Stay in your home and avoid foreclosure

Forbearance:

An offer by your mortgage company to temporarily
suspend or reduce your monthly mortgage payments for
a specifed period of time.
• Have time to improve your financial situation and get
back on your feet
• Less damaging to your credit score than a foreclosure
• Stay in your home and avoid foreclosure

Modification:

An agreement between you and your mortgage company to
change the original terms of your mortgage—such as
payment amount, length of loan, etc. You may also be
eligible for the government’s Home Affordable Modification
Program (HAMP) created to help struggling homeowners.
• May reduce your monthly mortgage payments to a more
affordable amount
• Less damaging to your credit score than a foreclosure
• Stay in your home and avoid foreclosure

Download full Borchure

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  You can email me @  chance at ballard-company.com or http://www.myspace.com/chancegates

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RISMEDIA, March 27, 2010—(MCT)—It’s been 16 months since Eugene and Patricia Harrison last paid the mortgage on their Perris, Calif., home. Eleven months since the notice got slapped on their front door, warning that it would be sold at auction.

A terse letter from a lawyer came eight months ago, telling them that their lender now owned the house. Three months later, the bank told them to pay up or get out by the end of the week.

Still, they remain in the yellow ranch-style home they bought seven years ago for $128,000, with its views of the San Jacinto Mountains. They’re not planning on going anywhere.

“We’re kind of on pins and needles, but who’d want to leave when you put this kind of energy into a house?” said Eugene Harrison, gesturing toward a bucolic mural of mountains, stream and flowers the couple painted on the living room wall.

Throughout the country, people continue to default on their home loans—but lenders have backed off on forced evictions, allowing many to remain in their homes, essentially rent-free.

Several factors are driving the trend, industry experts say, including government pressure on banks to modify loans and keep people in their homes. And with a glut of inventory in places like Southern California’s Inland Empire, Nevada and Arizona, lenders are loath to depress housing prices further by dumping more properties into a weak market.

Finally, allowing borrowers to stay in their homes helps protect the bank’s investment as it negotiates with the homeowners, said Gary Kirshner, a spokesman for Chase bank, a major lender. “If the person’s in the property, there’s less chance for vandalism, and they’re probably maintaining the house,” he said.

Economists say the situation won’t last forever, but in the meantime the “amnesty” may allow at least some homeowners to regain their financial footing and avoid eviction.

In the Inland Empire, an estimated 100,000 homeowners are living rent-free, according to economist John Husing, who based that number on the difference between loan delinquencies and foreclosures. Industry experts say it’s difficult to say how many families are in that situation nationally because only banks know for sure how many customers have stopped paying entirely.

But Rick Sharga of Irvine, Calif., data tracker RealtyTrac notes that the number of loans in which the borrower hasn’t made a payment in 90 days or more but is not in foreclosure is at 5.1% nationally, a record high. And yet the number of foreclosures last year was 2.9 million, below the 3.2 million that RealtyTrac economists predicted.

More evidence is provided by another firm, ForeclosureRadar, which says it now takes an average of 229 days for a bank to foreclose on a home in California after sending a notice of default, up from 146 days in August 2008.

“For some reason, banks are being more lenient with homeowners who are behind on their loans,” Sharga said. “Whether it’s a strategy to try and slow down the volume of foreclosures or simply a matter of the banks being able to keep up with volume is something that banks only know for sure.”

Lenders say the trend reflects their efforts to work with borrowers to modify loans to avoid foreclosure. Bank of America “continues to exhaust every possible option to qualify customers for modification or other solutions,” spokeswoman Jumana Bauwens said.

Some lenders are making it a policy to partner with delinquent borrowers. Citibank said this month that it would let borrowers on the brink of foreclosure stay at their homes for six months, whether or not they make payments, if they turn over their property deed. Such policies may partly reflect the fact that lenders can’t keep up with all the foreclosures, some say. “The mortgage lenders are so backlogged that some people are able to slip through the cracks,” said Kathryn Davis, a real estate agent at America’s Real Estate Advocates in Corona.

That was apparently the case for the Harrisons, who were told at various times that their house had been sold, that it belonged to someone else and that it was empty. “It’s been frustrating,” said Eugene Harrison.

The Harrisons missed their first payment in October 2008, shortly after Patricia Harrison lost her job as a healthcare aide and her husband’s part-time towing work dried up. They said they applied for a loan modification but were told that they couldn’t receive one until they were three months behind on their payments. So they stopped paying.

In April 2009, they received a notice warning them that their property “may be sold at a public sale,” and in July, they were told their house was a bank-owned property.

The bank sent a notice by FedEx in October demanding $3,000, and when the Harrisons called to discuss this notice, they were told they had four days to vacate the house.

Panicked, they arranged to stay with family in New Mexico and started packing their things, filling their garage with boxes of books, camping equipment and art. But no one came to kick them out. “We were afraid to leave the house, afraid the sheriff was going to come,” said Patricia.

After contacting consumer advocates about their situation, the Harrisons decided to stay put. Soon after, two men in a white pickup truck showed up at the house and peeped in the windows, telling the Harrisons that they thought the house was abandoned. The Harrisons suspected they were planning to move in themselves and chased them away.

As they wade through the red tape, the Harrisons can’t imagine abandoning a house where they’ve left their mark in the goldenrod and potpourri rose walls, the new fixtures and stenciling in the bathrooms, the fruit trees planted in the yard.

Although the Harrisons’ future is uncertain, industry observers agree that the rent-free life can’t last forever. As home values climb, banks will find it financially advantageous to foreclose on delinquent borrowers and sell their properties.

“In many cases, particularly in California, people owe a boatload of payments, and no bank is going to forgive that,” said Guy Cecala, editor of Inside Mortgage Finance, a trade publication.

In Diamond Bar, the Fraguere family is finally moving on after living rent-free for 18 months. Job loss and other setbacks prevented them from paying their mortgage, but they say they didn’t hear anything from the bank until a real estate agent showed up at their door last month saying she was going to sell their house.

Sandy Fraguere wasn’t surprised that it had taken the bank so long to ask them to move. “I don’t think they really knew what was going on or who was there,” she said.

Next stop for the Fragueres is a hotel, where they plan to stay for two weeks until their apartment in Chino Hills is ready for them to move in. Their dogs are being boarded and their belongings stored until they can retrieve them someday. The Fragueres have started saying goodbye to their neighbors, adding yet another empty house to a block that has already seen two other families forced to pack up and leave.

(c) 2010, Los Angeles Times.

Distributed by McClatchy-Tribune Information Services.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  You can email me @  chance at ballard-company.com or http://www.myspace.com/chancegates

RISMEDIA, May 13, 2010—With short sales making up almost 35% of home sales in March and the country with a national foreclosure problem, I Short Sale, Inc., one of the largest short sale firms in the U.S., sets the record straight on common short sale myths.

1. You must be default on your mortgage to negotiate a short sale. Short sales are not a function of default status on a mortgage. They are the result of the bank mitigating a potential default situation that, in the long run, will cost more money to the investors. We have completed many short sales in instances when the borrower was not in a default situation.

2. Listing my home as a short sale is embarrassing. Anytime we get ourselves into a tough financial situation it can cause some embarrassing feelings. It is important to remember that those feelings will not help us get back onto stable financial ground. We need to overcome our feelings and do what is right to protect our financial futures.

3. Buyers aren’t interested in short sale properties. Short Sale properties are often times available at a competitive price to other properties on the market. In many cases, short sale properties are very well cared for and have not had to endure the deferred maintenance of a REO property. Short Sale properties are in great demand in the marketplace.

4. There’s not enough time to negotiate a short sale before foreclosure. A good negotiator takes into account the timeline affiliated with a foreclosure. There is always a chance that a short sale can be negotiated. However, the only way to know for sure is to try.

5. The bank would rather foreclose than complete a short sale. Banks do not want to foreclose on property. It is expensive and carries a high level of liability once the bank owns that property as an REO. Wherever possible, banks are seeking other loss mitigation options before foreclosure.

6. Short sales are impossible and never get approved. Short sales are complicated, but not impossible. We negotiate short sale approvals every day.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  I can be reached by email at  chance at ballard-company.com or http://www.myspace.com/chancegates

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In February of 2010, the President announced additional help for homeowners living in areas deemed “hardest hit” by the fallout of the housing crisis. A new $1.5 billion funding initiative called the FHA Hardest-Hit Fund provides money for housing finance agencies or FHAs in Nevada, Michigan, California, Florida and Arizona.

The Hardest-Hit Fund was created to offer  “relief in direct proportion to the scale of each state’s housing challenges.” In plain English, that means housing finance agencies in the affected states will get government money based on the scale of declining home values, unemployment figures and the number of delinquent mortgages.

What does all this mean for someone with an FHA loan who is in danger of default and foreclosure? If you live in one of the affected states, when you go to your lender to negotiate forbearance, an altered payment schedule or other options designed to prevent foreclosure, the bank has more financial incentive from the government to help the borrower. The FHA Hardest-Hit program gives lenders in these five states more flexibility to create programs designed to prevent a mortgage from going into default or foreclosure including:

• Loan modification
• Mortgage forbearance
• Principal reduction for borrowers who are over-leveraged
• Loan principal reduction for borrowers with “severe negative equity”
  It’s very important to note that the Treasury Department has not mandated an across-the-board set of measures that must be taken with this funding; all programs a lender initiates with Hardest-Hit funds must be evaluated to insure it’s in compliance with rules put in place through the Emergency Economic Stabilization Act. Your lender may choose to design an anti-foreclosure program not offered in other areas, or one that has features similar programs lack—as long as the program is in compliance with federal law.One such type of relief suggested by the creators of the FHA Hardest-Hit program as an “acceptable transaction” is the unemployment program concept. This could be offered in the form of some assistance to qualified FHA borrowers who are currently unemployed and in danger of foreclosure on their FHA home loan. Another type of relief considered an acceptable transaction is second lien reduction where the second lien is either modified or reduced. Is your FHA loan eligible? At press time there doesn’t seem to be specific guidance that includes or excludes FHA mortgage holders–check with your lender to see if there are plans to create a relief program with FHA Hardest-Hit funds that could include your FHA home loan.

  Under the new Hardest-Hit guidelines, lenders who create programs to help individual homeowners must target residences with unpaid principal equal to or less than the Fannie Mae or Freddie Mac conforming limit (up to $729,750 for single-unit homes, more for multi-unit buildings).

  If you are in danger of default or foreclosure in Nevada, Michigan, California, Florida and Arizona, ask your loan officer if your FHA home loan could benefit through the Hardest-Hit program. If your lender is still putting together a program to help individual homeowners, you may be able to work out an arrangement in the meantime to put off foreclosure or default until the lender’s relief program is approved. Don’t wait until the last moment to act—if you are struggling financially you may be able to save your home in the meantime simply by asking your lender for help.

From www.fha.com

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  You can email me @  chance at ballard-company.com or http://www.myspace.com/chancegates

Which is the better investment to build equity?

While it’s a little easier now to get a condo loan than it was a year ago, you’ll still find tight restrictions, particularly if you need a Federal Housing Administration-backed mortgage. Typically, an FHA lender will approve you only if at least 50% of the units in a complex have either been sold or placed under contract (by owner-occupiers, not investors). Additionally, if 15% or more of the units are more than 30 days past due on payments, that could be another loan stumbling block. If a condo board doesn’t set aside at least 10% of its dues toward reserves and improvements, loan approval also might be a problem, especially if the complex is in an area where values have consistently declined.

If you do go the FHA condo route, be prepared for the loan-approval process to take longer while the lender applies those tests. However, if an entire condo project is FHA-approved, which many now are, buyers will find a smoother road to financing. At present, down payments for condos are a little higher (20% to 25%) than for houses (10% to 20%), although FHA down payments can be much lower.

• On our blog, ‘Listed’: Prefab home grows to two stories, still eco-friendly

Among the pros for condo living are ease of upkeep and “location, location, location,” especially for city dwellers who desire amenities and transit options that are usually within short walking distance. Condo cons include the monthly maintenance fees and a condo board that decides how those fees are spent, sometimes forcing owners to subsidize amenities they don’t use. (By the way, condo maintenance fees aren’t tax-deductible.) In many condo communities, foreclosures and delinquent dues have forced associations to pass along shortfalls to other owners. You’ll also have to get the condo board’s permission for any renovations you might want to make (some housing developments also have associations and similar restrictions).

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In a house, you will have a yard, the freedom to make improvements and the option of having pets, but you’ll also have greater upkeep requirements and a lot more space to fill with potentially expensive stuff.

In either case, always consider the neighbor of the condo or home. As a fresh-out-of-college person, you’ll probably want to be around young professionals instead of the baby-boom set, and both groups tend to reside more heavily in urban condos. Also, remember, great location is a bigger factor in buying a condo than a house.

Dollar for dollar, condos tend to appreciate less in value than houses, but not at all price points or in all markets. Single-family houses are generally a little easier to sell, particularly now, with so much available condo inventory.

So do your homework

Read more at realestate.msn.com

As a Reno/Sparks real estate consultant I encourage and questions or comments on the Reno/Sparks real estate market or any of the article I post. Please send emails t0  chance at ballard-company.com

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RISMEDIA, March 31, 2010—(MCT)—Wynn Bloch has always dutifully paid her bills and socked away money for retirement. But in December she defaulted on the mortgage on her Palm Desert, Calif., home, even though she could afford the payments.

Bloch paid $385,000 for the two-bedroom home in 2006 when prices were still surging. Comparable homes are now selling in the low $200,000s. Bloch, a retired psychologist doubted she’d see her investment rebound in her lifetime. Plus, she said, she was duped into an expensive loan.

The way she sees it, big banks that helped fuel the mess all got bailouts while homeowners like her are left holding the bag. No more. “There was not a chance that house was ever going to be worth anywhere near what my mortgage was,” said Bloch, who is now renting a few miles away after defaulting on the $310,000 loan. “I haven’t cheated or stolen.”

Time was when Americans would do almost anything to hang on to their homes. But that commitment appears to be fraying as more people fall behind on their loans, while watching the banks and lenders that helped trigger the financial crisis return to prosperity.

Nearly one-quarter of U.S. mortgages, or about 11 million home loans, are underwater, with buyers’ houses worth less than their loans. While home values are regaining ground, they remain far below their 2007 peak. Many homeowners are just now coming to grips with the idea that prices will take years to reach the pre-crash peak: as long as 14 years in California, according to economist Chris Thornberg.

Stuck with properties whose negative equity won’t recover for years—feeling betrayed by financial institutions that bankrolled the frenzy—some homeowners are concluding it’s smarter to walk away than to stick it out.

“There is a growing sense of anger, a growing recognition that there is a double standard if it’s OK for financial institutions to look after themselves, but not OK for homeowners,” said Brent T. White, a law professor at the University of Arizona who wrote a paper on the subject.

Just how many are walking away isn’t clear. But some researchers are convinced that the numbers are growing. So-called “strategic defaults” accounted for about 35% of defaults by U.S. homeowners in December 2009, up from 23% in March of 2009, according to Luigi Zingales, a professor at the University of Chicago’s Booth School of Business. He and colleagues at Northwestern University’s Kellogg School of Management reached that conclusion by surveying homeowners about their attitudes and experience with loan defaults. They found that borrowers were more willing to walk away if someone they knew had done it, and that the greater a homeowner’s negative equity the more likely they were to default, even if they had could make the monthly payment.

Similarly, an analysis released last year by credit bureau Experian and consulting firm Oliver Wyman estimated that walkaways accounted for nearly one in five homeowners who were seriously delinquent on their mortgages in the last three months of 2008.

“The fact that people are strategically defaulting—there is no question,” Zingales said. “The risk that the number of people doing this might explode is significant.”

A flood of walkaways could damage the nation’s fledgling housing recovery by swamping the market with foreclosed properties. Still, some experts are dubious that millions of underwater homeowners will pull the plug like Bloch did. Home ownership remains the cornerstone of the American dream. Moving is a hassle and the stigma associated with a foreclosure is likely to keep many hanging on for a recovery.

The biggest surprise is that so many underwater homeowners continue to pay, according to White, the Arizona law professor. He’s convinced that personal shame, as well as moral suasion by the government and financial institutions has kept many homeowners from walking away, even when they’d be better off financially to dump their homes.

But real estate veterans said old taboos are eroding fast. Jon Maddux, a former real estate investor who founded You Walk Away, a for-profit company that guides homeowners through the process of default in 2007, said his earliest customers struggled with emotional ties to their homes as well as remorse about reneging on an obligation. That’s changed as more homeowners have concluded that the housing market isn’t going to rebound quickly and they’d be better off cutting their losses. “Now, it’s more of a business decision—it’s people who could afford their house, but it’s an inconvenience,” Maddux said. He and other experts said average Americans are fed up with hearing how they’re supposed to honor their debts while businesses operate by another set of rules.

Consumers typically begin to think about walking away once the value of the property is 25% lower than the value of the debt, according to research conducted by Sam Khater, senior economist at real estate research firm First American CoreLogic. About five million people nationwide are in that situation, he said.

Some purchased their homes at the peak of the market only to see the value drop precipitously when the bubble burst. Others bought low, but couldn’t resist borrowing against their rising equity to make home improvements and to pay off other bills. When home values fell, they too found themselves underwater.

Ken Henrich purchased his Marysville, Calif., home for $187,000 in 2004. He and his wife later refinanced the property, tapping the equity to pay off credit cards. They now owe around $300,000 on a place that’s worth about $132,000. They let the four-bedroom residence slip into foreclosure and are currently waiting for it to be sold at auction. They’re planning on renting for a few years until they can possibly buy again. “We can more than make the payment,” Henrich said. “The way we look at it, our credit would still be perfect years from now, but we’d still owe tons more than it’s worth.”

There are consequences to walking away. A default will knock down a credit score by at least 100 points, said Craig Watts, a spokesman for FICO, the company that developed credit scores. That could make it tough to borrow money, rent an apartment or get a job since many employers now routinely check credit histories of potential hires.

To some, it’s a small price to pay to gain a measure of revenge against the financial institutions whose loose money helped to fuel the crisis. Joseph Shull, a marketing professor, said he’s planning on walking away from the town house he bought in Moorpark, Calif., in June 2006. “I’m angry, and there are a lot of people like me who are angry,” he said. He purchased the home for $410,000 and spent $30,000 renovating. Now the house is worth around $225,000. Shull admits he overpaid for his property, but he said it fell in value in part because of “regulatory mismanagement.”

(c) 2010, Los Angeles Times.

Before walking away there are other things a homeowner can try please checkout the following:
 http://www.makinghomeaffordable.com/requ…

 http://chancegates.com/2010/03/18/short-…

 http://chancegates.com/2010/03/14/home-o…

 http://chancegates.com/2010/02/26/2009-f…

 http://chancegates.com/2009/06/12/homeow…

Please get all your legal advice from an Attorney.

As a Reno – Sparks real estate consultant I encourage questions and comments regarding the Reno – Sparks real estate market or any of the articles I post here.  I can be reached at  chance at ballard-company.com

RISMEDIA, March 17, 2010—Distressed homes are still accounting for more than a third of all sales nationwide, providing evidence that real estate recovery is still fragile at best. While there is no magic bullet for understanding or navigating the short sale process, Realtors who excel at managing these transactions will find success in today’s market. In this month’s Power Broker Roundtable, industry leaders Terry Hankner, Helen Hanna Casey and Larry Hibler discuss how to take advantage of the distressed market.

Moderator:
Steve Brown, Special Liaison for Large Firm Relations, NAR

Participants:
Terry Hankner, President Comey & Shepherd REALTORS®, Cincinnati, Ohio
Helen Hanna Casey, President, Howard Hanna Real Estate Services, Pittsburgh, Pennsylvania
Larry Hibler, Broker, RE/MAX Achievers, Phoenix, Arizona

Steve Brown: While sales dropped slightly in December of 2009, the overall rate of existing home sales at the close of the fourth quarter was 15% higher than it was in the year-ago period. The price median rose a bit to post the first year-over-year gain since 2007, as inventory continues to shrink. That is reason for optimism as we move into the spring sales season. But since distressed homes are still accounting for more than a third of all sales nationwide, it is safe to say that recovery is fragile at best—and that until the jobless rate improves, the success rate will be highest for those REALTORS® who excel at managing short sales.

But therein lies the rub. The truth is there is no magic bullet for understanding, much less navigating the muddy waters of the short sale process…although there is now some hope on the horizon thanks to the upcoming Home Affordable Foreclosure Alternatives Program (HAFA) developed by the Treasury Department. Designed to simplify and streamline the use of short sales, the expected benefits of HAFA include: allowing borrowers to receive pre-approved short sale terms before listing the property; requiring borrowers to be fully released from future liability for their first mortgage debt; and the use of standard processes, documents and deadlines in the short sale process. For more details, visit www.REALTOR.org and remember that NAR also provides a dynamic Short Sales and Foreclosure Resource Certification (SFR) course to help educate members on this growing issue. More information can be found at www.realtorsfr.org.

Terry Hankner: Well, I don’t think there is any doubt that the problem begins with the lenders, who by and large have never clearly defined the issues or offered any reliable guidelines. What’s worse, their communication, in my opinion, has been lacking—excruciatingly slow and inconsistent.

Helen Hanna Casey: Yes, it’s been tough to even get a call back with any kind of timeliness, and that wears on everybody’s patience, agents, sellers and buyers. We try to get around that by relying on our most experienced agents—REO specialists who have long-time lender contacts and tend to have the best success rate.

Larry Hibler: The good news, at least in Arizona, is that we’re beginning to see some progress with that. Some lenders seem to be finally gearing up. We actually got one approval in seven days last month.

HHC: Amazing! How did that happen?

LH: Well, for one thing, we place a lot of importance on impressing the lender with the buyer’s strength and commitment. We submit only one contract at a time and the buyer has to put down non-refundable earnest money for a period of 60-90 days.

SB: What about seller issues?

HHC: We have high unemployment in Ohio, but I don’t think we had as much subprime lending or zero-down buying going on during the peak, so the problems may not be as dire here as in some areas. But all our agents are well trained in the financial alternatives so they can work with sellers who may be in trouble.

TH: The issues for us are disclosure, disclosure, disclosure, to be sure the sellers understand their options, whether short sale, foreclosure, loan modification or whatever. We use a program we call “Fresh Start,” which we present upfront as a for-profit entity designed to educate the seller, negotiate with the lender and handle any eventual sale of property. It took us two-and-a-half years to come up with the process, but we did do over 100 transactions last year, and our agents are not shy about referring business to this more experienced group.

LH: We’ve had good results using third party negotiators, who handle short sales for a flat fee. I’m comfortable with that from a liability point of view, and it takes responsibility off our agents.

HHC: It also takes the pressure off of having to deal with the banks ourselves. I don’t know whether some banks are just lagging in getting systems in place—like when there is a merger or acquisition—or whether they are deliberately stonewalling. Either way, it is exasperating.

SB: What needs to happen in order to see an improvement?

TH: Basically, the industry needs to do two things: the first is to reduce our risk in negotiating short sales, which is why disclosure is so important. The second is to hold lenders accountable for clarifying and articulating the ground rules. My worst nightmare is that, a year from now, some lender will come back after a seller and say, “we never really let you off the hook.”

HHC: I don’t think that’s going to happen unless there’s been fraud or collusion of some kind, but I do agree that disclosure is paramount, and that sellers would do well to seek legal counsel before they make a decision.

LH: I do think, though, that the banks are beginning to catch up with us and that the process shows signs of improving. I hope so, especially now that there is some stirring in the higher end of the market. Now we need to hope for continued improvement in the economy.

A quick note on the local Reno/Sparks real estate market foreclosed homes and short sales make up more than 50% of the market.
 http://chancegates.com/2009/05/11/behind…

 http://chancegates.com/2010/03/14/home-o…

 http://chancegates.com/2010/03/13/the-go…

As a Reno/Sparks real estate consultant I always welcome any comments or questions on the Reno/Sparks real estate or any of the articles I posted.  You can email me directly at  chance at ballard-company.com

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Mr. Paul, the Phoenix agent, was skeptical. “In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.”

There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal.

“You have one loan, it’s no sweat to get a short sale,” said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. “But the second mortgage often is the obstacle.”

Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.

“This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.”

But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser.

Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent.

Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer.

“A short sale provides peace of mind,” said Mr. Reddy, 32. “If you’re in foreclosure, you don’t know when they’re ultimately going to take the place away from you.”

Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said: “The place I’m in now is nicer and a little bigger.”

I know I said this before but a person need to hear something 3 times before they remember.  In the Reno/Sparks area about 1\3 of all real estate transactions are short sales.

As a Reno/Sparks real estate consultant I always welcome any comments or questions on the Reno/Sparks real estate or any of the articles I posted.  You can email me directly at  chance at ballard-company.com