When I first read this article "Getting Cash in Exchange for a Short Sale"http://bucks.blogs.nytimes.com/2011/09/22/getting-cash-in-exchange-for-a-short-sale/ by Ann Carrns I could hardly believe my eyes. Upon first read, it seems like a dream for underwater homeowners. However, this article seems to focus on California where it is my understanding that a first mortgage holder does not have recourse against a borrower on a principle residence for any deficiency on the note if the borrower defaults. In California, it appears that the only hope the Lender has of recapturing its equity is to take back the property in good condition for resale or get it to a short sale buyer. Since home values appear to still be dropping in most of the Nation, I will assume the Lender would like those options to happen sooner rather than later.
This is not the case in recourse states, such as Michigan, where the Lender may take the borrower to court to recapture some or all of its losses. In Michigan, I have not seen any Lenders offering cash to borrowers beyond the token "cash for keys" $3,000 to move out or as an incentive for a short sale or a deed in lieu of foreclosure. I would like to hear from others who negotiate short sales on behalf of borrowers. Please comment if you have seen any activity that would indicate Lenders are more willing to participate in Short Sales or Deeds in Lieu of Foreclosure.
Wednesday, September 28, 2011
Sunday, September 25, 2011
Federal Home Loan Assistance Program not as effective as hoped
In Paul Kiel's article "One Obstacle to Obama’s New Plan to Help Homeowners: A Gov’t Regulator" http://www.propublica.org/article/one-obstacle-to-obamas-new-plan-to-help-homeowners-a-govt-regulator. He states that the administration had expected to reach up to 4-5 million homeowners with Fannie Mae and Freddie Mac guaranteed loans with modifications for underwater property with the historically low interest rate offerings. However, only 838,000 homeowners had refinanced as of June 2011. In an attempt to increase the rate of homeowners who have been assisted by the program, the Obama Administration is suggesting that the Federal Housing Finance Agency (FHFA) back the modifications instead of leaving the risk in the hands of the original lenders.
The argument for FHFA backing is that original lenders are reluctant to make loan modifications based on the idea that homeowners who are already in trouble on their notes, will continue to be and more so, with a loan modification. If FHFA takes over the risk from the original lender, then more loan modifications may happen.
The argument against this is coming from the FHFA director Edward DeMarco himself, and rightly so. Allowing FHFA to guarantee the risks for original lenders would, once again, shift the risk of possible inappropriate lending from the lenders and their mortgage brokers to the taxpayers. This puts too much risk and burden on the taxpayers which the article claims has already reached $141 Billion. There is no mention of whether Fannie Mae and Freddie Mac could continue to pursue lenders in court for reimbursement. Some lenders had agreed to home loans for borrowers who were not qualified for loans under the FHA guidelines, but whose notes were then turned over to Fannie Mae and Freddie Mac. There is at least one lawsuit filed http://stopforeclosurefraud.com/2011/05/03/complaint-u-s-v-deutsche-bank-mortgageit-for-reckless-practices/) on matters such as this to reimburse the taxpayers for payment on risks which should be the original lenders alone. Unless the Administration's suggestion to have FHFA guarantee the loan modifications under FHA guidelines comes with a reservation of rights for the U.S. Government to sue the original lender for recovery on the original note then further guarantees should be granted.
The argument for FHFA backing is that original lenders are reluctant to make loan modifications based on the idea that homeowners who are already in trouble on their notes, will continue to be and more so, with a loan modification. If FHFA takes over the risk from the original lender, then more loan modifications may happen.
The argument against this is coming from the FHFA director Edward DeMarco himself, and rightly so. Allowing FHFA to guarantee the risks for original lenders would, once again, shift the risk of possible inappropriate lending from the lenders and their mortgage brokers to the taxpayers. This puts too much risk and burden on the taxpayers which the article claims has already reached $141 Billion. There is no mention of whether Fannie Mae and Freddie Mac could continue to pursue lenders in court for reimbursement. Some lenders had agreed to home loans for borrowers who were not qualified for loans under the FHA guidelines, but whose notes were then turned over to Fannie Mae and Freddie Mac. There is at least one lawsuit filed http://stopforeclosurefraud.com/2011/05/03/complaint-u-s-v-deutsche-bank-mortgageit-for-reckless-practices/) on matters such as this to reimburse the taxpayers for payment on risks which should be the original lenders alone. Unless the Administration's suggestion to have FHFA guarantee the loan modifications under FHA guidelines comes with a reservation of rights for the U.S. Government to sue the original lender for recovery on the original note then further guarantees should be granted.
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