Thursday, December 29, 2011

MSNBC - Increase in short sales give market a little breathing room

Another article talking about the move away from foreclosures and short sales. Couple of interesting points:
  • Blaming the robosigning scandal for the slowing of foreclosures. This seems simplistic to me ... I think it's simpler than that - banks net more money in a short sale, and they are in business to increase the profits and minimize the losses.
  • Honest assessment of foreclosure vs. short sale credit impact (immediately after talk of "torching" credit ratings) - Fair Isaac says they are the same. And yes - all future movement shows that lenders prefer to see a short sale on the  report, and give loans sooner.
  • Value preservation, and better for the neighborhood. This is a great, and often overlooked point. Not only doing what is best for YOU, but also what is best for OTHERS.
  • Ability to negotiate the settlement pre-foreclosure. Yes, this is true in states without anti-deficiency statutes, but it is also true in states where certain loans are not covered by anti-deficiency statutes (like most HELOC's in Arizona).
  • Vandalism of vacant homes. This is HUGE - massive issue that is not addressed often enough. I cannot tell you how many homes I have seen with AC's and plumbing stolen - in a short sale, the property is typically occupied until the day of closing, at which point the new owner moves in.
All in all, a bit surfacey, but good reading, and obviously I agree with the overall conclusion. Click here to read the full article.


Unknown said...

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Some junior lien holders and others with an interest in the property may object to the amounts other lien holders are receiving. It is possible for any one lien holder to prevent a short sale by refusing to agree to negotiate a reduction in their payoff to release their lien. (Iowa has a procedure, sale free of liens, which allows a foreclosure court to "cram down" a short sale over the objections of the junior creditors.) If a creditor has mortgage insurance on their loan, the insurer will likely also become a third party to these negotiations, since the insurance policy may be asked to pay out a claim to offset the creditor's loss. The wide array of parties, parameters and processes involved in a short sale can make it a complex and highly specialized form of debt renegotiation. Short sales can have a high risk of failure from inability to obtain agreement from all parties, or they might not be approved in time to prevent a scheduled foreclosure date.
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Unknown said...

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