Does this even make sense? About the only thing I see this doing is changing the foreclosure stats. It is not helping the home owners and it certainly is not helping the banks. Short Sale or Foreclosure, the home owner’s credit is shot and the bank is eating a ton of money. On the other hand, I don’t see anyone tracking short sale stats like they do foreclosure stats.

“Hey, sell your house short and we’ll give you $1,500 for helping our numbers look better.”

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Mr. Paul, the Phoenix agent, was skeptical. “In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.”

There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal.

“You have one loan, it’s no sweat to get a short sale,” said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. “But the second mortgage often is the obstacle.”

Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.

“This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.”

But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser.

Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent.

Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer.

“A short sale provides peace of mind,” said Mr. Reddy, 32. “If you’re in foreclosure, you don’t know when they’re ultimately going to take the place away from you.”

Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said: “The place I’m in now is nicer and a little bigger.”

Posted in: Short Sales
Tags: banking industry, delinquent borrowers, Foreclosure, foreclosures, loan modification, mortgage lenders, Mortgages, real estate agent

I just finished reading “The Housing Boom and Bust” by Thomas Sowell and it was a great book. Dr Sowell has a real gift for making things understandable and also taking apart various arguments and refuting them logically.

I highly recommend this book to anyone who wants to be able to learn from history so that we may not repeat it.

Here is a YouTube video I found from the Hoover Institute of an interview with Dr Sowell on his book:

Another valuable lesson from this book is a very understandable explanation on house the various parts of the housing market works. What is the purpose of Fannie and Freddie? It’s all in the book.

Posted in: Housing Market
Tags: community reinvestment act, fannie mae, freddie mac, housing boom and bust, thomas sowell

Just a reminder…

FIRST TIME BUYERS

Credit: Equal to 10 percent of the home’s purchase price, up to $8,000

Who Qualifies:

• Those who haven’t owned property in the last three years
• Those with income up to $225,000 for couples and $125,000 for individuals (credit phases out for people who make more than these amounts)
• Must be at least 18 years of age to claim credit
• Purchase price must be $800,000 or less

Deadlines:

• Have until April 30, 2010, to enter into contract for a home purchase
• Have until June 30, 2010, to close on the purchase

CURRENT HOMEOWNERS

Credit: Equal to 10 percent of the home’s purchase price, up to $6,500

Who Qualifies:

• Those who have owned and lived in their principal residence for at least five consecutive years during the past eight years
• Those with income up to $225,000 for couples and $125,000 for individuals (credit phases out for people who make more than these amounts)
• Must be at least 18 years of age to claim credit
• Purchase price must be $800,000 or less

Deadlines:

• Have until April 30, 2010, to enter into contract for a home purchase
• Have until June 30, 2010, to close on the purchase

In addition, buyers have another year to take advantage of the higher loan limit for mortgages backed by the Federal Housing Administration, Fannie Mae or Freddie Mac — set at 125 percent of local median home sales prices, up to a maximum of $729,750 in high-cost housing markets. The limit in normal markets will remain $271,050 for FHA and $417,000 for Fannie Mae and Freddie Mac.

What this all means is that many more buyers qualify for a tax credit. So what are you waiting for? If you’re even remotely considering buying a home, now’s the time to do it. Don’t let the first time buyers have all the fun.

Posted in: Home Buying
Tags: binding contract, first time buyers, home buyer, loan limit, Mortgages, tax credit

U.S mortgage rates retreated below 5% last week, propping demand for home loans after purchase applications sank to a nearly 13-year low the prior week, Mortgage Bankers Association data showed on Wednesday.

February’s volatile swings in housing demand comes on the heels of a steep January sales slump, blamed mainly on unusually harsh winter weather.

The industry group’s market index, which measures requests for loans to buy homes and refinance, rose by a seasonally adjusted 14.6% in the week ended Feb. 26 to the highest level since mid-December.

Purchase applications increased 9% while refinancing requests jumped 17.2% last week as average 30-year mortgage rates fell 0.08 percentage point to 4.95%.

“Mortgage applications rebounded last week, particularly refis, as rates dropped back below 5%,” Michael Fratantoni, vice president of research and economics at MBA, said in a statement. “Purchase activity remains subdued, with application volumes remaining within the narrow range seen in the last few months.”

Refinancing loans represented about 69% of all applications last week.

In January, sales of existing homes sank by more than 7% to the weakest level since June and new home sales set a record low.

Snow blasted most U.S. states, but the erratic sales pace in recent months also stems from the fits and starts of the $8,000 first-time home buyer tax credit.

The credit pulled sales forward last year as buyers raced to beat its November expiration. The incentive was ultimately extended, and expanded with a $6,500 move-up buyer credit, spurring a second wave of demand after a brief lull.

To get these incentives qualified borrowers need to sign contracts by the end of April and close loans by the end of June.

Still, U.S. housing is expected to stagnate at best as it emerges from a three-year crash that helped propel the U.S. economy into recession.

“We are seeing positive signs of some form of life, but it is not significant and the recuperation period is going to be significant because these are dramatic declines” in housing and employment, said Vickie Lester, president of mortgage servicing at RoundPoint Financial Group in Charlotte, North Carolina.

Unemployment lingers just below 10%. Foreclosures are running at a record pace and banks are sitting on stockpiles of repossessed properties yet to be placed on the market.

All of these factors threaten to slice home prices anew.

“People are taking jobs in other states and they can’t get rid of the property they have, so they’re not buying when they get relocated,” Lester added. “Everybody has had significant property value declines, equity is gone and they can’t very easily just go out there and apply for a new mortgage.”

About one-quarter of U.S. homeowners with mortgages had negative equity at the end of 2009, owing more on their mortgages than their homes were worth, based on various reports.

“The offsetting impact of affordability and distressed inventory could yield a somewhat flattish housing market over the next two years — a slight decline in 2010 followed by a rebound in 2011,” Desmond Macauley, senior strategist at RBS, said on a conference call on Tuesday.

Progress is being made on modifying loan terms for many borrowers in default, and interest rates remain low, but housing is seen unlikely to gain much ground as long as joblessness stays high.

Posted in: Mortgages
Tags: 30 year mortgage, 30 year mortgage rates, first time home buyer tax credit, market index, mortgage applications

Short sales – when a lender sells a property for less than the full amount owed on the mortgage – are notorious for being long and painful. Some realtors even refuse to touch short sales because of the uncertainty involved. In spite of the growing backlog of distressed homes, banks have been taking up to several months to respond to short sale offers, often because they lack the staffing and know-how to process such sales faster. That is leaving many homeowners and their real estate agents in an interminable waiting game.

But homeowners who are underwater and struggling to offload their homes through a short sale may get relief soon through Home Affordable Foreclosure Alternatives (HAFA). Part of the government’s Making Home Affordable program, HAFA is designed to incentivize borrowers and lenders to avoid foreclosure. It takes effect April 5, lasts through Dec. 31, 2012, and is aimed at homeowners who are eligible for a loan modification but unable to complete the process.

What banks are doing
Already, some banks appear to be working to facilitate the short-sale process, perhaps in anticipation of HAFA. A JP Morgan Chase spokesman says the bank doubled its short-sale staff during 2009. And in response to the rise in volume, a Bank of America spokeswoman says the bank “increased the number of associates working in short sales to keep in line with the increased demand for short sales.”

Indeed, short sales jumped to 15.9% of home purchase transactions in January, from 12.4% in November, according to a monthly survey by research firm Campbell Surveys and Inside Mortgage Finance, a trade publication. Just in the last 30 to 45 days, some banks have significantly increased their staff handling short sales and the amount of short sales they’re approving, says Rob Lattas, a real estate attorney in Chicago who handles short sales. Typically, it’s taken anywhere from four to six months – and sometimes more – to complete one of these transactions. “We’re seeing short sales now come out between 30 and 60 days, which is crazy. We’re seeing banks being more cooperative,” Lattas says.

The realtor’s perspective
Realtors are echoing that sentiment. Jackie Hillman, a realtor with ReMax Premier Group in Tampa, Fla., says the short-sale transactions she handles are getting a bit easier, in part because lenders are more proactive. Last week Hillman sent a short sale listing agreement a client’s lender, usually the first step in the process. It usually takes a few days for the lender to even acknowledge they received the agreement. “But they called me the very next day and assigned me to a negotiator, which normally takes a couple of weeks,” she says.

“As soon as you tell [the bank] your client is interested in a short sale, they want to get the ball rolling. They realize they can’t make people wait around for six months – the owners might walk away,” Hillman says.

HAFA changes
Under the HAFA guidelines, borrowers receive preapproved short-sale terms before listing the property (including the minimum acceptable net proceeds). Before, sellers submitted a buyer’s offer without knowing if the lender would accept the amount. “Now we will know what the bank’s threshold is before we go through this whole rigmarole,” says Lattas.

The loan servicer must respond within 30 days of a homeowner requesting a short sale. And they must respond within 10 days of receiving a sale contract as to whether they’ll approve or deny it.

The new rules also require the lender to forgive the seller’s mortgage debt (on their first mortgage). This is a promise that the bank will not pursue the seller for the outstanding balance on the mortgage.

And financial incentives include $1,500 for the borrower for relocation assistance and $1,000 for servicers to cover administrative and processing costs.

Real estate professionals are hopeful the new guidelines and incentives will make short sales easier to accomplish. “If the HAFA guidelines are actually followed, it’s a great thing for the short-sale marketplace. The biggest frustration I have as attorney is clients saying ‘I’m still waiting to hear from the bank.’ Now banks have 10 business days to say whether they’ll approve or deny the sale,” Lattas says.

Obstacles remain
Of course, even with the new regulations, things may still get held up.

One possible obstacle: If the current buyer for a short sale decides to terminate the purchase – say, because it’s taking too long – often the real estate agent involved in the sale ends up back at square one. They have to re-submit the short-sale package to the lender and are given another negotiator (the person who negotiates the sale on behalf of the lender) – essentially forcing them to start all over again, says Stephanie Fix, a realtor with ReMax Professionals in Denver.

Another potential snag involves second-lien holders. Typically, short sales are made additionally complicated when sellers have more than one loan on their property. HAFA requires second-lien mortgage holders to drop financial claims against borrowers exceeding $3,000 (they are often owed many times more than that).

These lenders must agree to release the lien for the transaction to close. But even with the $3,000 limit, they may hold the deal ransom and demand more from the first-lien holder or seller in exchange for releasing their claims. “A lot of these short sale deals have fallen through because of the second lien,” says Fix. “It will be interesting to see how the banks – the ones participating in HAMP – will follow these guidelines.”

Posted in: Short Sales
Tags: Foreclosure, loan modification, Short Sales

Posted in: Science
Tags: Earth, NASA

Conservative radio host Rush Limbaugh is saying adios to the Big Apple and selling his Fifth Avenue penthouse, asking almost $14 million.

Limbaugh bought the 10-room condo at 1049 Fifth Ave. in 1994 under the name of R H Trust, according to city property documents. The pad sprawls across nearly 5,000 square feet and two of its terraces overlook Central Park and its famous reservoir.

The pre-war property features a double living room; a wood-paneled library; four terraces; enormous baths; and a maid’s room. But it’s not for the faint of heart — or those afraid of a big renovation. The general appearance can be described as, well, ornate, with trompe l’oeil ceilings and mural-covered walls.

Other lavish features include gold leaf moldings, mahogany floors, upholstered walls and an Italian marble foyer.

Luxury broker Corcoran Group is listing the property, but the firm chose not to release photos or confirm the celebrity resident. Limbaugh was not available for comment.

So what’s all that worth? Limbaugh hopes to get $13.95 million for his home. For the tax rolls, the city values the property at $1.56 million and says property would rent for more than $26,000 per month.

Limbaugh, host of “The Rush Limbaugh Show,” has been a major voice in the conservative media arena for decades. In 2009, the pundit said he would sell his property after New York governor David Paterson proposed a so-called “millionaire’s tax” on residents who make more than $500,000 a year.

Posted in: Sell Your Home
Tags: central park, fifth avenue, penthouse, Rush Limbaugh

If you’ve been holding off on a real estate purchase, glimmers of a turnaround in the housing market may have you wondering if it’s finally time to make your move.

While home prices remain low, they’re no longer free-falling in most markets. Mortgages are historically cheap. And the sweet tax credit that was offered to new buyers last year has been extended to April 30 and expanded to include current homeowners too.

But for all the motivation to act quickly, buying right now is not a no-brainer. In some areas home prices may fall further. If you own a house now, it may take longer than you expect to sell it, and you may walk away with less cash than you thought.

“It’s a good time to buy, but it’s still a really difficult market,” says Patrick Newport of IHS Global Insight. As the clock ticks toward the tax-credit deadline, answer these questions to decide whether it’s time to get off the sidelines.

Can you really nab that tax credit?

Current homeowners who sign a contract to buy a home on or before April 30 get a dollar-for-dollar reduction on their taxes of 10% of the purchase price of the home, up to a maximum of $6,500 (first-time buyers can get up to $8,000).

But according to the National Association of Realtors, buyers spend about 12 weeks home shopping before making an offer, so if you haven’t already started looking, you may be pressed to meet the deadline.

Plus, to qualify for the full credit, your household income must be under $225,000 if you’re married and less than $125,000 if you’re single; repeat buyers must have lived in the home they are selling for five of the past eight years. The good news: Once you’ve signed the contract, you have until June 30 to close the deal.

How much could you lose by waiting?

Besides the loss of the tax credit, the biggest game-changer facing buyers is a potential jump in mortgage rates. If the Fed moves ahead with its plan to stop buying mortgage-backed securities at the end of March, the rate on a 30-year fixed mortgage is expected to increase nearly a percentage point from today’s 5.18% to 6.1% by the end of 2010, according to the Mortgage Bankers Association. On a $300,000 fixed-rate mortgage, that’s an extra $174 per month.

But if home values are falling in your area, you don’t have much to lose by waiting. If the house you want costs $375,000 today and you put down 20%, you’d pay $1,644 a month for a fixed-rate mortgage at 5.18%. Buy that same home for 5% less later on with rates at 6% and you’d only pay an extra $65 a month. If prices plunge 10% or more this year (as they are expected to in 12% of markets, according to Fiserv), you’ll come out even or ahead.

To get a handle on the direction of your market, check trulia.com to see whether inventory levels are increasing, and visit realtytrac.com to find out whether foreclosure filings are still rising. A glut of properties and bank-owned homes means a recovery may not be in sight.

How quickly can you sell the home you now own?

Even in markets that are recovering, sellers must price aggressively to make a fast deal.

“Everybody thinks their house is worth more than it is,” says Dallas realtor Bruce Lynn. Before you sign a contract for a new place, ask a few agents to give you a realistic figure that will generate a quick sale. Can’t bear to part with your home at that price? Waiting may be your only option.

Also keep in mind that, with the credit crunch not far in the past, lenders may not approve your purchase until you’ve sold your home. A delay in sale could also stick you with two mortgages, far outstripping any savings from the tax credit.

See if the sellers will let you put a contingency in the contract that negates the sale if you don’t find a buyer — it’s a long shot but worth a try. If they won’t, propose adding a kick-out clause that allows the sellers to keep their home on the market, but lets you either pull out or quickly move ahead with the deal if they get another offer.

While extra contract negotiations may be a hassle, the past few years have proved that a purchase decision shouldn’t be taken lightly. “This may be the best time in history to buy a home,” says Denver realtor Jeff Fogler, “but only if you can really afford it.”

Posted in: Home Buying
Tags: association of realtors, first time buyers, home shopping, Housing Market, mortgage backed securities, mortgage rates, national association of realtors, tax credit