Banks miss an easy housing fix

From CNN:

Banks say they want to help troubled homeowners, but they are delaying deals
that could save everyone - including the lenders themselves - a lot of time and
money.

Lenders are taking much longer than necessary to approve short sales,
according to Duane LeGate, of House Buyers Network, a short sale specialist.
In a short sale, a homeowner who cannot keep up with their loan asks the
lender to take a dollar amount less than what is owed on a home's mortgage, and
forgive the remainder of the unpaid debt.

So if a borrower has a mortgage balance of $100,000 and finds a buyer who will pay $95,000 for the house, the lender agrees to accept that $95,000 and close out the loan.

"There was a much greater chance of success with these in the past," said LeGate

Ideally in a short sale, everyone wins. Borrowers avoid the ugly foreclosure process
that destroys their credit, while lenders recoup more of their costs than they
would by spending the time and money it takes to kick an owner out and resell
the property.

The CNN article is worth a read, and it discusses a number of problems that sellers, investors, and agents are having as they try and get short sales approved in today’s housing market.

In our experience as closing attorneys who work with investors, the entire short sale experience differs greatly from lender to lender, and there are few industry-wide standards that can be applied when negotiating a short sale. Some lenders require that their borrower be down a payment before talking short sales. Others don’t. Some are very responsive and work quickly to get potential short sales approved. Others drag their feet. Overall, it is impossible to paint with broad strokes the attitude of the mortgage lenders toward short sales, just because individual lenders approach them very differently.

To be fair, though: the recent rise in the number of short sale requests is unprecedented, and frankly something the mortgage industry was not prepared for. While years ago a lender might have a very few individual short sale loss mitigators, today they’ve had to create entire departments, with all of the policies, procedures, and bureaucracy that entails.

Still, with home prices continuing to fall and an increasing number of homeowners finding themselves upside-down in their mortgages, short sales are becoming ever more common. As they do, one should expect those lenders who have yet to streamline their short sale processes to do so, and the overall experience to become smoother and more uniform from lender to lender.

Photo: Safe And Secure, originally uploaded by bob1217.

Mixed News: Foreclosures

RealtyTrac, the online marketer of foreclosure properties, has just released their report detailing nationwide foreclosure filings in February.

Last month, foreclosures fell 4% from January’s levels, but there was a 60% increase from February 2007.

As a closing attorney for real estate investors, we are definitely seeing the effects. More and more of our clients are buying REO properties and funding those acquisitions with hard money. We’ve also seen a dramatic increase in the number of short sales prior to foreclosure.

What we’re seeing less of these days: mortgage reinstatements.

The RealtyTrac report seems to indicate that all of the recent governmental efforts to help borrowers avoid foreclosure aren’t really helping.

Again, investors should plan on these levels of foreclosures continuing for the foreseeable future.

Photo: R ------------------------------------> L, originally uploaded by johanna.

Atlanta Foreclosures Hit Record High

From the AJC: Metro Atlanta foreclosure notices in January hit a record 6,992 according to Equity Depot, up 45% from a last year.

One of the main culprits? Resetting interest rates of adjustable rate mortgages. And as subprime mortgage resets don’t peak until later in the year, the number of foreclosures, already at an all-time high, should increase.

This is not anything really new; we’ve been saying for months that the number of foreclosures is going to keep increasing.

For investors, as with much of the housing news these days, this is mixed news. On one hand, investors looking to sell houses are competing with these foreclosures, and as we know, prices are being driven down and it is becoming increasingly harder to sell property.

On the other hand, the opportunities for buying houses are unprecedented. Almost every property these days presents a short sale possibility. Hudson and Marshall is conducting cut-rate REO auctions. And with an unprecedented wave of REO properties coming, the number of opportunities presenting themselves to investors is only going to increase.