Assist2Sell

First of all let me say, my heart goes out to all those affected by the gulf oil spill. The effects of this disaster will be felt for years to come. 

With that said, I read the article below and was disturbed. I understand everyone’s first reaction is to figure out how they can help. The question is, where do you draw the line?  Disasters happen on a regular basis. Hurricanes, tornados, earthquakes, floods, wild fires, and blizzards. These events are devastating to all involved. Does the government now determine what disasters warrant relief?   

I think “mother nature” didn’t cause this disaster so the government can point the finger at someone.  Is Fannie going to pass the bill for “relief” on to BP?  Maybe that’s the plan? Get BP to pay for some of our losses?

I think Fannie is opening Pandora’s box with this one. 

CNBC's Diana Olick - Oil and Real Estate: Fannie Mae to the Rescue

“There is no question that while oil has barely brushed the beaches here in Pensacola, the place is awash in fear. But then a ray of hope…from none other than the government-controlled mortgage behemoth Fannie Mae, which is in so much hot water itself that it actually had to delist from the stock market yesterday. "Servicers may immediately suspend or reduce mortgage payments for borrowers whose properties or income are negatively impacted by the Gulf oil spill," goes the press release.

“We want to give homeowners every opportunity to weather this unprecedented disaster, including relief from their mortgage payment if that will help them get back on their feet and stay in their homes,” said Michael J. Williams, President and CEO. “Our policy is in place to support those who are experiencing a disaster-related hardship through no fault of their own and are acting in good faith to meet their mortgage obligation.”

This is part of the company's (or should I say agency's) “Special Relief Measures” policy. Borrowers can get up to 90 days of relief while the servicer "determines the nature and extent of the impact the disaster is having on the condition of the property or on the borrower’s financial condition." And what then? "At the conclusion of that assessment, servicers have additional flexibilities to evaluate the appropriate loss mitigation alternative based on a case-by-case determination, including an additional three months of forbearance, a loan modification or other customized solution."

Sounds great, if this were, like, 1997, and the housing market was otherwise fine and dandy. So many Floridians are already in the midst of trying to get loan modifications and forbearance plans, that I'm just not so sure how you separate it all around here. But then I think about the government, which has been trying to pull itself out of the housing market, and is now just dipping itself right back in. I wonder just how this announcement is going to affect underwater borrowers in Florida, even those who don't live near water. The very process of deciding who is really a victim of oil and who is just a victim of the ongoing housing crisis? Just the mechanics of it! I'm sure far greater minds than mine in the upper levels of our government have already thought of that.”

Existing-home sales rose again in April with buyers motivated by the tax credit, improving consumer confidence and favorable affordability conditions, according to the National Association of Realtors®. Existing-home sales, which are completed transactions that include single-family, town homes, condominiums and co-ops, increased 7.6 percent to a seasonally adjusted annual rate of 5.77 million units in April from an upwardly revised 5.36 million in March, and are 22.8 percent higher than the 4.70 million-unit pace in April 2009. Lawrence Yun, NAR chief economist, said the gain was widely anticipated. “The upswing in April existing-home sales was expected because of the tax credit inducement, and no doubt there will be some temporary fallback in the months immediately after it expires, but other factors also are supporting the market,” he said. “For people who were on the sidelines, there’s been a return of buyer confidence with stabilizing home prices, an improving e
 conomy and mortgage interest rates that remain historically low.”

Total housing inventory at the end of April rose 11.5 percent to 4.04 million existing homes available for sale. The national median existing-home price for all housing types was $173,100 in April, up 4.0 percent from April 2009. Distressed homes accounted for 33 percent of sales last month, compared with 35 percent in March. Single-family home sales rose 7.4 percent to a seasonally adjusted annual rate of 5.05 million in April from a pace of 4.70 million in March. NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said buyer traffic is mixed. “It looks like the level of home sales that close in May and June will stay elevated, but many buyers remain in the market even without the tax credit,” she said. “Some Realtors® tell us they are very busy with clients who are entering the market now as a result of improved conditions, while others are welcoming a slowdown from frantic market conditions in recent months.”

The real estate industry is still waiting to see how the market will adjust after the expiration of the first-time homebuyer tax credit, but more consumer incentives are about to be cut, this time from the Federal Housing Administration (FHA). The FHA will reduce allowable seller concessions — the percentage sellers can take from the sales price of a home to fund closing costs — from 6% to 3%. According to an announcement in January, the current level of 6% exposes the FHA to excess risk by creating incentives for appraisers to increase the value of these homes. The change will take place in “early summer,” according to the FHA, but a spokesperson said no specific date has been set. The closing costs include fees for origination, attorneys, appraisal and inspections, title search, title insurance, credit reports, and more. Down payment assistance is not included as a closing cost. 

Yesterday the Federal Reserve left interest rates near zero and vowed to keep them there for a while to nurture an economic recovery held back by stubbornly high unemployment.  The policy statement reflected a somewhat brighter tone than it had at the previous meeting in December.  "Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating,'' the Fed said.  In the December statement, the Fed had said economic activity "has continued to pick up.''  The decision to hold rates steady was 9-1, with Kansas City Federal Reserve Bank President Thomas Hoenig dissenting because he wanted the central bank to eliminate a phrase vowing to keep rates exceptionally low for an extended period.  However, the Fed dropped a reference that had been included in December's statement which said the housing sector ''has shown some signs of improvement over recent
 months.  ''The Fed repeated its intention to allow purchasing of some $1.43 trillion in housing-linked debt to conclude as scheduled by the end of March, but added: "The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.''

If you live in the Reno Sparks area and have had some contact with real estate sales, you have probably heard the term SHORT SALE.  So what does a short sale actually mean? The simple definition is your mortgage balance is greater than the current value of your home. For example, if you bought your home for $250,000 a few years back and got a mortgage for say $230,000.  For some reason you now have to sell your home. Unfortunately, if you sell your home today it will only sell for $150,000. This means the proceeds (selling price) will be “short” $80,000.

Here is an entry from wikipedia. A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan.^[1] It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.                                                                                                               

So why would a bank be willing to take less than the home is worth? First of all, to even be considered for a short sale, you would have to have a signification “financial hardship.” Loss of a job, escalating mortgage payments, pay cuts, etc.. So the way the bank looks at it is if you are going to quit making payments on your home, we are going to have to foreclose on the house.  The foreclosure process is lengthy and costly for a mortgage company. In addition, after the foreclosure the house will sit vacant and may get vandalized, the lawn will dye, and a stigma will be attached the property. In the end the foreclosure cost more and the property will end selling for less, not to mention the negative impact on the neighborhood. This is a loose-loose scenario for the bank/mortgage company.

With a short sale, the costs are much less, the property remains occupied, maintenance is kept up, and the property will normally sell for a higher price. The bank/mortgage companies will still loose money, but on a short sale the loss will be reduced.

Short sales are usually much better for the homeowner as well. The impact on credit is much less, you are able to stay in the house until it sells, and the neighborhood is saved from foreclosure.

If you are experiencing a financial hardship and are having trouble making your payments, a short sale might be a good option. As always, you should seek guidance from real estate professionals, attorney, and your CPA before you make a decision.