Archive for the 'REO' Category
An insider’s look at an REO specialist — the properties
CLOUDY WITH A CHANCE OF FORECLOSURE
It is becoming more and more evident that the well intended loan modification programs such as HAFA (Home Affordable Foreclosure Alternatives) are simply not working as anticipated. These short sales are only a small part of the solution.
What we may see in the not too distant future is a swing from an emphasis on Loan Modification to Home Liquidation.
REO’s or Bank Owned properties continue to be growing at a faster rate than ever. The pipeline of defaults (Shadow Inventory) which will eventually become REO’s continue to swell.
There are an estimated 1.7 million shadow inventory properties which is substantially up from the same period last year.
The slowdown in the current REO inventory is due to the feeble attempt to short sale these properties. At some point, these properties will have to become REO.
Until we can get unemployment under control, this trend will probably continue.
WHERE IS THE SHADOW INVENTORY
For those of you in the business, you know exactly what I am referring to. For everyone else, time to let you in on what is coming.
According to the experts, the number of foreclosed homes in this country is continuing to grow. Numbers are constantly changing but the current amount seems to be around 1.7 million.
These properties are in some stage of default and are getting ready to hit the housing market. While this inventory has been rumored to be hitting the market for about a year now, this has not yet occured.
So this Shadow continues to loom ove the housing market.
Where are these properties, what are they going to do to the already fragile housing market and what effect will this have on the equity in your home or lack there of?
There have been several moratoriums put in place in order to hold off on the avalance of foreclosures. With the economy just now beginning to make a recovery, it is anticipated that the shadow inventory will slowly be released into the housing market as not to cause a double dip recession and put the economy back 12 months.
With most people’s largest investment in their home, driving down home prices further will only continue to complicate this situation of upside down mortgages, a slow economy, and unemployment. The inventory is going to have to be released slowly in order to keep balance not only in the housing market, but in employment and money markets.
So what does that mean? The housing recovery is vital to our economy. This will not fix itself orvernight. It is going to take time. Home values will not be able to increase and equity to return to homes until the shadow inventory is flushed through the system.
The housing market will recover, but not until the shadow of foreclosed homes are moved.
THE SHORT SALE – A Foreclosure Alternative
There are a multitude of things the homeowner faces today such as the unstable real estate market, the national economy, maintaining your mortgage payments, pay cuts, and loss of your job to name a few.
Being foreclosed upon in addition to everything else effects your credit score and can cause severe emotional stress.
The homeowner does have options which include reinstatement of their loan, a loan modification, forbearance etc which can all be a very long drawn out process.
Keep in mind, the main goal of a short sale is to AVOID FORECLOSURE.
First we need to look at what a short sale is:
A short sale is a real estate transaction in which the proceeds from the sale do not cover the balance owed on a loan or loans the owner may have on the property. Basically, the lender is accepts a discounted payoff on the loan and allows the sale of the property to close.
The bank will allow to discount the loan due to an economic hardship on the part of the mortgagor. The homeowner will then be able to sell the mortgaged property for less than the balance of the loan and turn all of the proceeds over to the lender.
This is accomplished through negotiation with the banks loss mitigation department. Basically, the lender is willing to take a loss now to avoid larger costs later.
The advantage to the homeowner is you avoid eviction, and avoid a foreclosure on your credit. While a short sale does affect your credit, it is far less than a foreclosure.
The downside of a short sale is that it is an extremely complex and is a highly specialized type of real estate transaction. The failure rate is extremely high with the time frame being approximately 75 days to obtain an approval from the servicer.
The Federal Government has several programs that should also be considered such as HAFA. You can get more information about HAFA by going to www.HafaProgram.com
