My solution to the housing crisis is to incentivize banks to streamline the short sale process by offering them a percentage of the deficiency out of the Government’s $75 Billion Dollar Mortgage Modification Fund on top of what the home sells for on the open market. The borrower receiving the short sale principle reduction would then agree to pay back that percentage to the US Taxpayers through a long term, low interest payment. The bank(s) agree not to pursue the borrower for the deficiency. The percentage that the bank(s) receive can be worked out; be it 10%, 20%, 50%, or whatever.

Everybody wins. The banks have a financial incentive to make the short sale process easy and not pursue homeowners for the deficiency. The borrowers receiving the short sale get out from a bad financial situation but are held responsible for a payback of the Government funds they use to do so. This will minimize the number of people who are not in danger of going into foreclosure taking advantage of the program. For the US Taxpayers, this program will speedup the recovery, drop foreclosure rates significantly, and ensure that they are paid back for the bulk of financial assistance they provide.

Undoubtedly there will be people who take advantage of the program. There will also be people who stop making their deficiency percentage payback payments.

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10.44% of all home loans in America were at least one payment past due but not yet in the foreclosure process. 4.58% of all home loans in America were in the foreclosure process. 15.02% of all home loans in America, on a non-seasonally adjusted basis, were in foreclosure or at least one payment past due. This was the highest ever recorded in the MBA delinquency survey. As high as these numbers were at the end of 2009, it still means that roughly 85% of all home loans in America are running smoothly. Lenders are reluctant to make the loan modification or short sale process easy for troubled homeowners because they are afraid that a chunk of the 85% of people making their mortgage payments might stop and try to take advantage.

Here is the report from the Mortgage Bankers Association:

http://www.mbaa.org/NewsandMedia/PressCenter/71891.htm

For more Information like this and North Scottsdale Real Estate News visit:

http://www.North-ScottsdaleRealEstate.com

As part of the Government’s Home Affordable Modification Program (HAMP) the treasury department unrolled the Home Affordable Foreclosure Alternatives Program (HAFA) which will pay homeowners to sell at a loss. This is in an effort to encourage more troubled homeowners to go through a short sale rather than a foreclosure. HAFA starts April 5^th, 2010.

$1500 to the home owner to ease their transition to a new home “relocation assistance”

Servicing bank will get $1000.

Another $1000 can go toward a second loan, if there is one

The payments come out of the $75 Billion mortgage modification plan. As well, the program is supposed to help streamline and standardize the short sale process.

Lenders and investment pools owning many home loans get more money from short sales

Community and the lender doesn’t have to deal with a vacant home (Up to 50% of vacant homes get ransacked)

Borrower gets assurance the lender will not sue for unpaid mortgage balance

Federal Program would require banks to accept offer if it is at or above the value assigned by a real estate agent

Borrower must prove hardship and that foreclosure is immanent

Here is the program outline from Home Affordable Modification Program:

https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf

Here is a Ney York Times article talking about Home Affordable Foreclosure Alternatives Program:

http://www.nytimes.com/2010/03/08/business/08short.html?pagewanted=all

The following table contains units of homes on the MLS in North Scottsdale, which is comprised of zip codes: 85258, 85260, 85255, 85254, 85259, 85262. All information was pulled on 3/4/2010 from ARMLS’ Home Listings Database and is deemed reliable but not guaranteed.

The bottom 2/3 of the table compares the last three months of sales to the same 3 months a year ago and is broken down by All Sales, Equity (not bank owned and not short sale), short sale, and REO (Bank Owned). I took it a step further and break it down by the type of home sold (All Types, Single Family Houses, Condo/Townhouses).

The Mortgage Debt Relief Act of 2007 is over at the end of 2012, which implies that if you are going to go through a short sale or a foreclosure on your primary residence… you better do it soon. Talk to your accountant. The following video talks about some of the highlights of the Mortgage Debt Relief Act of 2007.

For specifics on The Mortgage Debt Relief Act of 2007 straight from the horse’s mouth visit the IRS’ website at http://www.irs.gov/individuals/article/0,,id=179414,00.html

Check out the program specifics here: Making Homes Affordable FAQ

Have you had any experiences with making homes affordable or other Government programs created for the housing crisis? If so, please email us at MyOpinion@ThePrecisionTeam.com or leave a comment below.

Here is the full text explaining these conditions as per the standard Residential Resale Real Estate Purchase Contract from Arizona Association of Realtors®:

Loan Contingency: Buyer’s obligation to complete this sale is contingent upon Buyer obtaining loan approval for the loan described in the AAR Loan Status Report without conditions no later than COE Date. If Buyer is unable to obtain loan approval without conditions by COE Date, Buyer shall deliver a notice of the inability to obtain loan approval without conditions to Seller or Escrow Company no later than COE Date.

Unfulfilled Loan Contingency: This Contract shall be cancelled and Buyer shall be entitled to a return of the Earnest Money if after diligent and good faith effort, Buyer is unable to obtain loan approval without conditions by COE Date. Buyer is aware that failure to have the down payment or other funds due from Buyer necessary to obtain the loan approval without conditions and close this transaction is not an unfulfilled loan contingency. Buyer acknowledges that prepaid items paid separately from earnest money are not refundable.

Appraisal Contingency: Buyer’s obligation to complete this sale is contingent upon an appraisal of the Premises by an appraiser acceptable to lender for at least the sales price. If the Premises fails to appraise for the sales price, Buyer has five (5) days after notice of the appraised value to cancel this Contract and receive a refund of the Earnest Money or the appraisal contingency shall be waived.

Have you had any experiences buying or selling real estate where the Finance Clause or Appraisal Contingency have come into effect? We want to hear from you, send us an email to MyOpinion@ThePrecisionTeam.com or leave a comment below.