So today's business news in the Daytona paper says: "GOVERNMENT LAUNCHES SHORT-SALES EFFORT" Dateline-Washington: "The government launched a new effort on Monday to speed up the time-consuming, often- frustrating process of selling your home if you owe more than it's worth. The Obama administration will give $3,000 for moving expenses to homeowners who complete such a sale - known as a short sale - or agree to turn over the deed of the property to the lender. It's designed for homeowners who are in financial trouble, but don't qualify for the administration's $75,000,000,000 (that's $75 Billion) mortgage modification program."
Wow! I think there should be a law that says the word "government" must always be in upper case letters... and that anyone who speaks it, should do so reverently and with their head bowed. Just go to the GOVERNMENT (head bowed) Money Tree and get some! They'll just take it from "those rich ba*#@^ds" and give it to those who really deserve it!
This "Short Sale vs. Foreclosure vs. Deed-in-Lieu of Foreclosure vs. Mail Your Keys to the Bank and Walk Away vs. Screw This, Let's Gut the Place and Trash It Too," is a whole new era in American real estate... and verification of "the human condition."
We can hate and blame the banks all we want (and it's mostly justified)... yet there is plenty of blame to go around. Borrowers are not immune. To say it's the bank's fault, because they gave loans that people couldn't afford, is absurd. Come on! Remember how mad you got when you were a kid and your Mom said, "If all the other kids jumped off the bridge, would you jump too?" Hey, the banks did not give 100% warranties that home values would skyrocket into infinity! Stuff goes up... and stuff goes down. If we were making $30,000 a year, didn't it seem just a tiny bit weird that we were buying a $500,000 house?
Oh, and on this morning's news that mentioned, "or agree to turn over the deed of the property to the lender?" BE CAREFUL!!! If you give the deed back to the bank, you may face a future of credit challenges, as if you'd been through an actual foreclosure! Talk to a reputable, honest, experienced Realtor before you do anything. Ask if your Realtor holds the industry gold standard in training - the coveted "CDPE" Certified Distressed Property Expert designation. You may also want to consult with your attorney and your CPA. (I know you're laughing and shaking your head... "If I had an attorney and a CPA, I probably would have enough assetts to not be in this mess.") There are, however, plenty of homes on the ocean and high on hilltops with city views... that are in some form of distress.
So, here's some of the explanation of the government programs - HAMP and HAFA - At their best, they could help to aleviate the real estate bottleneck of distressed sales. Let's hope so:
H A F A
- means Home Affordable Foreclosure Alternatives Program. HAFA was designed to provide incentives for Borrowers doing a short sale (or a deed in lieu) in order to avoid foreclosure.
Loan Servicers (Mortgage Companies, Banks, and those that do the actual loan servicing) who participated in HAMP (Home Affordable Mortgage Program) are required to participate in the HAFA program. For the rest, it’s voluntary.
The HAFA program is set to begin on April 5, 2010 and all HAFA agreements must be finalized and signed by December 31, 2012.
HAFA Provisions:
•Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
•Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
•Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
•Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
•Uses standard processes, documents, and timeframes/deadlines.
•Provides the following financial incentives:
◦$3,000 for borrower relocation assistance;
◦$1,500 for servicers to cover administrative and processing costs;
◦Up to $2,000 for investors who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a one-for-three matching basis.
•Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation. [http://www.realtor.org/government_affairs/short_sales_hafa]
BOTTOM LINE: It's a government program - a bureaucracy at its core - and will be hard to implement and monitor. It's too soon to tell how it will wash out. At its worst, it will hurt taxpayers and profit the banks even more. At its best, however, it could be quite successful and clear out about half of the distressed properties clogging "normal" markets. Let's hope for the best!
