Obama Announces Plan to Help Struggling Homeowners

Governmental Affairs, Mortgage Lending, News 1 Comment »

Yesterday, President Obama unveiled the Homeowner Affordability and Stability Plan, the administration’s $75 billion effort to help up to 7 to 9 million families avoid foreclosure by refinancing their mortgages.

The key components of the plan are:

  • Government Sponsored Enterprises (GSEs) Refinancing for Up to 4 to 5 Million Responsible Homeowners with GSE loans to Make Their Mortgages More Affordable
  • A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners
  • Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac

NAR has developed a good summary of the plan to help REALTORS® understand how it is structured.

Posted by Scott Sherrin at 12:15 pm

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Foreclosures: Part of the Problem or the Solution?

Governmental Affairs, Mortgage Lending, News 3 Comments »

In this past weekend’s edition of The Wall Street Journal, opinion writer Ramsey Su argues that the government should not step in to prevent foreclosures, which he believes are the free market’s way of dealing with the current real estate crisis. By not allowing the market to deal with its own problems, Su argues that the government would be creating “a generation of mortgage slaves.”

What is the market telling us? Dataquick recently released December sales data for Southern California, once the hotbed of speculative excesses supported by nontraditional financing. Foreclosures now dominate sales. Prices are down. Sales volume is up. New home construction is down. These are beautiful textbook illustrations of supply and demand driving price and market equilibrium.

It seems Su is not alone in this opinion. In an interview with Memphis native Sarah Lacy on the Yahoo! Finance Tech Ticker yesterday, investor Paul Kedrosky agreed with Su and cited California as an example of free-market forces at work:

Kedrosky cites California as an example: Real estate prices fell so hard, so fast here that a lot of the foreclosure protection programs didn’t get a chance to work. And, as a result, prices have bottomed out and property is starting to move again.

So should the government work to prevent foreclosures, or will that just prolong the pain?

Posted by Scott Sherrin at 3:16 pm

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Short Sales and Foreclosures: Still a Hot Topic

Education, Events, News No Comments »

With all the news (or is it hype?) about foreclosures and short sales, it’s not surprising the topic generated a lot of interest from MAAR members with more than 100 attending a panel discussion today in the MAAR Education Center. The panel - made up some local experts on both topics includeing Jeff Burress of Crye-Leike, Bonnie Garrison of Magna Bank, Kim Hairrell of Crye-Leike, and Joe Kirsch of the Law Office of Shapiro & Kirsch - spent more than an hour and a half discussing issues and answering questions related to short sales and foreclosures.

While foreclosure statistics seem to be a hot topic of debate, according to MAARdata numbers there were 2,198 foreclosure sales recorded in Shelby County during the first four months of 2008, a 12.1% increase from the same period in 2007.

The panelists covered a lot of material; here are some of the highlights:

  • When working with a seller who might be in a short sale situation, find out as early as possible in the process. The seller’s lender must agree to a short sale and that process takes time.
  • When a lender has a agreed to a short sale, the listing agent should consider any MLS rules that might apply and consider getting the seller’s permission to disclose the potential short sale in the REALTOR® remarks section of the MLS listing.
  • It’s often more difficult to complete a short sale on a home with a second mortgage. In those cases not only one but two lenders have to agree to take less than what they’re owed.
  • When working as a buyer’s agent on a short sale or foreclosure, it can take longer to get an offer accepted as it requires the bank’s approval. Bank personnel are often working with hundreds of cases at once so don’t assume yours is their first priority.
  • In cases where mortgage insurance is involved, a deal can fall through even when the lender agrees because the mortgage insurer won’t accept the terms of the sale.
  • Banks are not like other sellers - they’re not likely to negotiate on offers that are much below the dollar amount that they must net in the sale.
  • Cash buyers are not necessarily more attractive to a bank in a short sale or foreclosure situation - don’t assume they can offer much less just because they’re paying cash. The banks don’t care where the money is coming from.
  • Working with foreclosures requires a big investment of the listing agent’s time and money - they act as property managers and any maintenance expenses come out of their pocket up front.
  • In a foreclosure auction, the opening bid is always from the bank or investor who owns the property.

And these points are just the tip of the iceberg. The National Association of REALTORS® offers several resources for members online, and a good starting point is the Field Guide to Short Sales and Field Guide to Foreclosures. MAAR is also offering a class specifically on short sales on Friday, August 8, from 9 a.m. to noon.

Posted by Scott Sherrin at 3:47 pm

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