When Freddie Mac Wins, Homeowners Lose

For those who purchased a home between 2003- 2009, they owe it to themselves to talk with a Realtor about the ins and outs of a short sale, says Chris White, and here's why...

"Freddie Mac, a taxpayer-owned mortgage company, is supposed to make homeownership easier. One thing that makes owning a home more affordable is getting a cheaper mortgage.But Freddie Mac has invested billions of dollars betting that U.S. homeowners won't be able to refinance their mortgages at today's lower rates, according to an investigation by NPR and ProPublica, an independent, nonprofit newsroom", according to National Public Radio.

White is very concerned for his clients and these investments, while legal, raise concerns about a conflict of interest within Freddie Mac. Freddie Mac, formally called the Federal Home Loan Mortgage Corp., was chartered by Congress in 1970. Their website says it has "a public mission to stabilize the nation's residential mortgage markets and expand opportunities for homeownership."
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First-Time Buyers and Short Sales

First-time buyers are often less patient than move-up buyers, and don’t want to wait for a short sale to go through. But with patience and a good short-sale savvy Realtor, first-time buyers can hit a jackpot. 

According to the monthly Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, the share of short sales purchased by first-time buyers dropped to 40% in August 2011 after peaking at 54% of all short sales in November 2009.

“A short sale can be a great way to get an undervalued property, but buyers need to make sure that both agents, including their buyer’s agent and the listing agent, are experienced with short sales,” says Chris White. “I always recommend that buyers put in a drop-dead date into their contract, such as allowing the lender 30 days to approve the offer, because this puts pressure on the listing agent.”
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Why Short Sales Are Better for Homeowners

It’s a tarnished silver lining for people at risk of losing their houses and homeowners in neighborhoods blighted by bank-owned properties, but the robosigning scandal that slowed the foreclosure process to a crawl appears to have increased lender interest in short sales.
“Foreclosure sales are pretty devastating,” said Faith Schwartz, executive director of Hope Now, a resource for homeowners facing foreclosure. “We’d much prefer a modification, but if [homeowners] don’t quality, then the next best alternative is deed-in-lieu or short sales.”

Short sales, in which the lender agrees to let the owner sell the home for less than the amount owed on the mortgage, and foreclosures both climbed in 2010, but while short sales rose by 26,000 this year, the number of foreclosures fell by 255,000, according to Hope Now.

Short sales, along with deed-in-lieu of foreclosure deals in which the lender takes the deed essentially as payment for the mortgage, still upend families, torch credit ratings and hurt neighboring property values, but they’re far less toxic than foreclosures.
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Freddy Mac Adds Washington to Winter Sale Locations

Freddie Mac has expanded its winter REO sales incentive program to the states of Alaska, Kansas, Kentucky, Missouri, Oregon, and Washington. That makes the promotional offer now active in 33 states and the District of Columbia.

“We’re expanding our winter promotion to focus additional incentives to encourage strong sales activity in our ‘cold weather’ states over the next several months,” said Chris Bowden, VP of HomeSteps.

Offers must be received by HomeSteps between November 15, 2011 and January 31, 2012, with escrow closed on or before March 15, 2012. This offer is valid only on HomeSteps homes sold to owner-occupant buyers.

The program also extends additional incentives to these owner-occupant buyers. Freddie Mac will pay up to 3 percent of the final sales price towards the borrower’s closing costs. Some homes are also eligible for a two-year Home Protect limited warranty that covers electrical, plumbing, air conditioning, heating, and other major systems and appliances.

Quicker Approvals

Banks are not only approving more short sales, they’re doing it in less time. In the second quarter, short-sale homes, also known as pre-foreclosures, sold an average 245 days after default, down from 256 days in the previous period, according to Irvine, California-based RealtyTrac. That reversed three straight quarters of increases.

"I use an attorney practice specializing in convincing the banks that a short sale benefits them as well as the seller. Our ratio of closed short sales outbeats other local agents", say Chris White, RE/MAX Metro and Eastside.

Teaming Up to Fight Short Sale Fraud

In a short sale, Freddie Mac agrees to accept less than a full payoff of a mortgage when the borrower is unable to sell their home for enough to pay off their entire loan. Freddie Mac short sales have risen from about 4 percent of completed workouts in 2000 to nearly 14 percent in 2010.Short sale fraud, also on the rise, enters the picture when real estate professionals fail to disclose affiliations with other parties involved in the transaction to rig sales at a low price and hide better offers from Freddie Mac and the distressed home seller. Then, after the house is sold, the fraudster can flip it a few hours later for the better price and walk away with the profitable difference.By concealing the higher offer, short sale fraud worsens losses to home sellers, Freddie Mac, and taxpayers.

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Short Sales Surge

Bank assisted short sales of homes surged in the second quarter of the year as buyers snapped up discount priced properties at some of the lowest mortgage rates in decades. The surge in home purchases from pre-foreclosures account for an eighth of all residential sales, but represent less than a quarter of all U.S. home sales.

Short sales, in which banks cooperate with mortgage holders to sell at a price for less than what is owed on the mortgage had an average sales price of $192,129, according to RealtyTrac. The figure represents a discount of about 21% under homes that are not foreclosures or short sale properties.
The surge in sales may be a major step for the housing market, troubled by record foreclosures and declining home values in most areas of the country. High unemployment and underemployment levels make it nearly impossible for more than a third of all U.S. households to qualify to purchase a home.

10 Ways Your Agent is Successful with Short Sales

1. Get educated. "Education is the first step," says Chris White. "I have the CDPE ; you need this kind of training if you’re going to speak confidently and intelligently about the process." Remember that this is someone’s financial future in your hands, so you need to know what you’re doing, or you should refer the lead on to a Short Sale specialist.

2. Team up with experienced agents. If you’re new to Short Sales, it’s wise to find an agent who is doing them and is willing to partner up with you to share expenses and responsibilities. Not only will you learn the process and become better prepared, you’ll also minimize the chances of fudging your first few sales if you have a skilled mentor. "Fortunately I've successfully closed over 50 Short sales for my clients", says White.


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Are Short Sales Still a Good Option?

I get asked all the time about the short sale process. Is it a good idea? How bad does it damage your credit? Why does it take so long? While the process can be extremely lengthy at times, overall it is still a good idea for those in a specific situation.

We all know that market values on the majority of homes has dropped and in some cases quite significantly. If you are willing to take a loss on your home and want out of your current situation then a short sale is a great idea.
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Congressional Bill to Speed Up Short Sales

A new bill to improve the process for approving short sales may soon bring relief to distressed homeowners who are unable to keep their homes and hope to avoid foreclosure. The bill, recently introduced in the U.S. House and strongly supported by the National Association of REALTORS®, would impose a deadline of 45 days on lenders to respond to short sale requests.The legislation, the “Prompt Decision for Qualification for Short Sale Act of 2011,” was offered in Congress by U.S. Reps. Tom Rooney (R-Fla.) and Robert Andrews (D-N.J.).

“The current short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a homeowner from foreclosure."

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How to Stop a Foreclosure

Are Taxes Owed on Short Sale Forgiven Debt?

One can only imagine all the high-fives and fist-bumps that erupt once a can't-make-ends-meet borrower finally, finally talks a lender into forgiving $3,000 in credit-card debt.

Now picture that person months later handing over a little piece of paper called a 1099-C to a tax preparer. The tax preparer must break the bad news: Most times, canceled debt is treated like income. And $3,000 of forgiven credit-card debt must be reported as income on the state and federal income-tax returns.

What Happened to the Government’s Short Sales Program?

In April, the Obama administration formally rolled out a new program, called Home Affordable Foreclosure Alternatives, that was designed to spur more short sales, where banks allow homeowners to sell their homes for less than the mortgage debt outstanding.

Like other foreclosure-prevention initiatives, this one appears to be off to a slow start — just 342 sales have been completed through September.HAFA was designed as a cousin to the Obama administration’s Home Affordable Modification Program, HAMP, whose woes have been well documented.
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New Consumer Website for Borrowers

Mortgage company Fannie Mae is introducing a website to help consumers who are struggling to avoid foreclosure learn about ways to get help. The government-controlled company has launched www.knowyouroptions.com. It is designed to provide easy-to-understand definitions of mortgage industry terms and online calculators that help consumers determine whether they can qualify for a refinanced mortgage or a loan modification.
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Why short sales make sense even if you have to file a bankruptcy.

The way to determine if you should do a short sale while in bankruptcy is to ask yourself this one simple question; Even though my creditis going to be damaged now, do I want to own a home again sometime in the future? If the answer is yes, then you should seriously consider the idea of doing a short sale regardless of a bankruptcy filing.
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Homeowners, A Shortcut To Short Sales Is Coming

The Obama administration last week introduced a program to encourage lenders to forgive some of the mortgage debt owed by homeowners. The purpose is to help people remain in their homes and reduce foreclosures. But the housing crisis is so huge that no one initiative can solve it all. So another kind of help is on the way. It's aimed at homeowners who can't afford to remain in their homes and instead want to sell them.
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Walk Away from Your Home? But Who’s Chasing You?

Is walking away really an option when facing foreclosure? A recent opinion piece in the Wall Street Journal; When It’s Ok to Walk Away From Your Home, gives advise that could lead down a scary alley. If you walk away, who might be chasing you? Unless the deficiency is released in writing by the lender, it can haunt you.
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The basics you need to know about a short sale.

A real estate short sale is a form of agreement between the seller of a home in the beginning stages of foreclosure and their lender, allowing the home to be sold for less than the existing loan balance outstanding. The mortgagee would accept less than the loan amount in order to avoid a foreclosure proceeding. This short sale would result in a substantially discounted purchase price for the buyer of the home. The buyer would then proceed with the purchase of the home much the same as in any conventional realty transaction.
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RE/MAX Leads the Way on Short Sale Reform

The U.S. Treasury Department recently announced new guidelines to the short sale process that could speed the housing market recovery, a move RE/MAX Executives have been promoting in Washington D.C. for the past year. Short sales, transactions that can occur when a lender accepts the sale of a home at a price below the actual amount owed on the home, have become an increasing part of the real estate business as besieged homeowners look for alternatives to foreclosure. RE/MAX Chairman Dave Liniger has promoted a streamlined short sale process since foreclosures began flooding the market and has presented specific proposals to government officials.
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Short Sales Are About to Increase

Get ready for the short sales. According to a Treasury spokeswoman, Treasury officials will soon announce a $2,500 subsidy ($1,000 to the servicer and $1,500 to the seller) to encourage short sales as a way to clear the excess inventory. The fees are designed to help compensate the servicer for the extra effort, and to incent the seller to be cooperative and leave the home in good condition. Presumably, the Treasury is trying to help facilitate a transaction that will result in less loss to the lender than in the case of a foreclosure.