House Bill would force Lenders to decide on Short Sales in 45 days

There is a new bill introduced in the U.S. House which would give lenders a 45 day deadline to respond to short sale requests to the borrower. 

This is a bipartisan bill (H.R. 6133) – Prompt Decision for Qualification of Short Sale Act of 2010 which is sponsored by Reps. Robert Andrews (D-New Jersey) and Tom Rooney (R-Florida).

The length of time it has been taking lenders to process the short sales has caused buyer’s to walk away.  Many lenders are taking from 90 days to several months without a decision made on the short sale.    The following states have the highest number of short sales:  California – 28%, Nevada 32%, Arizona 24%, and Florida 27%. 

Realtors across the country strongly support this bill and are urging Congress to pass the legislation quickly.  The National Association “NAR” of Realtor President Vicki Cox believes that quicker attention to the short sales process is vital to help homeowners who are underwater and their communities, as well as the nation’s economy.

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Fannie Mae and Freddie Mac Short Sales and Deeds-in-Lieu up 27% in 2nd Quarter

Nearly 31,000 borrowers with Fannie Mae (FNMA) and Freddie Mac (FMCC) loans forfeited their homes through a short sale or deed-in-lieu of foreclosure during the 2nd quarter of 2010.  This is a 27% increase over the 24,000 transactions completed during the 1st quarter of 2010.

During the same period last year there were 11,700 transactions up from 3,000 the year before.

 Federal Housing Finance Agency (FHFA) also reported that loan modification and refinancing by FNMA and FMCC were up in the second quarter.  The Home Affordable Modification Program (HAMP) increased 65% while refinancing under the Home Affordable Refinance Program (HARP) increased by 30%.  Loan servicers completed 171,200 permanent loan modifications on these types of loans thru HAMP and nearly 88,600 borrowers in HAMP trials transitioned to permanent modifications bringing the two companies HAMP numbers to nearly 225,000.  FHFA’s report also stated that approximately 202,000 of the borrowers were in a HAMP trial period at the end of the 2nd quarter, compared to nearly 448,100 at the end of the first quarter.  That means minus the 88,600 permanent modifications 157,500 homeowners’ HAMP trials were cancelled as a result of missed payments or inadequate documentation. 

FHFA also noted that more than ½ of the modifications completed in the 2nd quarter lowered borrowers’ monthly payments by more then 30%.  During this same period the two companies initiated 275,100 new foreclosures, an increase of 12%.  Completed foreclosure sales and 3rd party sales totaled 112,400, up 15% from the previous quarter.

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Is Home Affordable Modification Program Hampered?

The U.S. Treasury released statistics the end of July, 2010 for the Home Affordable Modification Program (HAMP) program.  The statistics showed that loans that have been permanently modified had a re-default rate to be around 2% – 5.9% 60 or more days past due after modification and 1.7% 90 or more days delinquent.  When those statistics came out, they received a huge outcry from analysts questioning the validity of these statistics. 

The Treasury pulled the numbers and re-evaluated the statistics after retaining a third-party consultant to provide independent validation.  A few weeks later, they corrected the re-default assessments as follows:  10% of six month old permanent modifications are 60+ days delinquent and 6% are 90+ days delinquent. 

Analysts say that’s still too low and the rates will surely go higher the longer the program is in place.  Up until six months ago, permanent modifications had been offered to only about 434,716 borrowers.  The Treasury has cancelled the temporary modifications of 616,839 borrowers. 

The analysts at Barclays are predicting a 60% re-default rate and Fitch Ratings projects 55-75%.

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With the Sacramento Real Estate market full of Short Sale Properties for Sale it is taking longer to close on the purchase of your new home.  Due to the vast number of short sale properties available, the banks are starting to back up again on the approval of short sale properties.

If you are unwilling to wait a minimum of 60-90 days for an approval of your offer then a short sale is NOT for you.   With the decrease of inventory available for sale in the Sacramento area, we are seeing an increase of multiple offers on our listings for sale.   We are also seeing quite a few buyers who are unwilling to wait for short sale approval.   This is the main reason we take BACKUP offers on our listings and ask that our buyers be held in backup position.  We have seen countless buyers who are in 1st, 2nd and even 3rd backup position get their home.  Patience is the name of the game in the short sale process.  

If you are making an offer on a Short Sale Property, be prepared for a lengthy process.   Updates are sometimes hard to come by, but working with a diligent agent who is well versed in Short Sales will help make the process quite a bit smoother and sometimes quite a bit faster.

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Bank Owned Properties on the Decrease?

Mortgage defaults in California have fallen to their lowest level in three years, market researcher MDA DataQuick said Wednesday.   In the Sacramento region, home defaults have dropped 38 percent in the past year. 
Some of the drop-off may reflect an increase in short sales, in which troubled homeowners sidestep the foreclosure process but still lose their homes. But experts said it’s also a sign of a housing market that’s genuinely improving.

Read more:

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Taking advantage of today’s low Sacramento interest rates

Ranch style home in North Salinas, California
Image via Wikipedia

In the past 32 years working in the real estate industry, I have not experienced a 4-1/2 % interest rate on a 30-year fixed rate loan.   It is time to give a lot of thought to purchasing a  home in this market. 

Are you concerned that  home values may decline?   

Sure, it is possible but will you ever see 4-1/2% again?   That equates to $450 for every $100,000 in the purchase price of your home.  Can you rent for that monthly payment?  I doubt it.  Lets also not forget the tax benefits of owning your own home and the freedom of making your house a home for you and family.

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