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Re/Max: Home short sales likely to increase
Denver Business Journal
Re/Max International Inc. of Denver expects “short sales” — sales of homes for less than the amount owed on the mortgage — to increase nationwide because of the federal government’s newly released guidelines for such sales.
“Until now, the short sale process has been cumbersome for all involved, and took upwards of eight to 10 months for a transaction to close. … But with new guidelines issued Monday, short sale transactions will increase dramatically, which means less vacant and vandalized properties in neighborhoods across the country,” Re/Max Chairman Dave Liniger said in a Wednesday statement.
Re/Max is one of the world’s largest franchisors of residential real estate brokerage firms, with operations in more than 70 countries.
On Monday, the U.S. Treasury Department set long-awaited guidelines designed to simplify and speed up the short sale process through its Home Affordable Foreclosure Alternatives Program. The program goes into effect April 5.
Short sales, which must be approved by the mortgage lender, are alternatives to foreclosure, and preferable for homeowners over foreclosure because short sales don’t hurt the seller’s credit rating.
The new short sale guidelines include:
• Mortgage servicers have 10 days to accept or deny a short sale request. After a sale is completed, the borrower could be completely released from debt.
• Borrowers are eligible to receive a $1,500 moving allowance, if they sell their home through a short sale.
• Mortgage servicers will receive $1,000 for each completed short sale.
• Investors who hold first mortgages can get as much as $1,000 for allowing second lienholders to release their liens. A lien is a charge against a property that makes it security for payment of things such as a mortgage, debt or taxes.
• Second lienholders can get only as much as $3,000 in proceeds from short sale to release their liens.
In recent months, second lienholders have demanded more money from the buyer, seller or first lien holder to release their claims. This country’s largest second lienholders include Bank of America Corp., Wells Fargo & Co., JP Morgan Chase & Company and Citigroup Inc.
The Treasury Department’s new short sale program expands on its Home Affordable Modification Program (HAMP), which offered incentives to mortgage lenders to modify loans for homes on the brink of foreclosure, rather than foreclosing on the homes. HAMP has had only limited success.
The treasury department on Monday also increased pressure on mortgage lenders to make 650,000 trial loan modifications permanent.
“… The Treasury’s new guidelines go a long way in incentivizing both lenders and homeowners to work together to keep homes from falling into foreclosure,” Liniger said.
A recent study by the University of Michigan states that U.S. foreclosures will begin to fall next year, but the national housing market will continue to “take a beating for some time to come” because of steep increases in unemployment.
After increasing more than 30 percent a year for the last four years, foreclosures will drop to about 1.75 million in 2010 and 2011, the study predicts. They should be down to less than 1.5 million by early 2012.
The study says the decreasing foreclosures are being driven by the improving national economy, slowing home price depreciation and tighter mortgage underwriting standards.
Compiled by Paula Moore
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