Everyone knows there are a ton of foreclosures and other "distressed" properties that mortgage lenders are coping with lately. I have written about using a short sale, one of the methods employed by many to deal with their crisis. In summary, the lender takes a reduced payoff on the home to avoid the costs of a foreclosure, and the homeowner is allowed to walk away from the obligation without paying the entire mortgage. The lender also reduces the time it takes to market the home, along with the resulting deterioration from sitting idle. The homeowners get their credit dinged a bit, but nowhere close to the damage a foreclosure causes.
The biggest problem in handling short sales has been the amount of time it takes lenders to respond to offers. It is frustrating for all parties, including real estate professionals, when we work so hard to achieve a successful short sale, and the lender takes as long as three months to make a decision. Most buyers don't have that much time to waste, and frequently they back out because they find a more responsive seller.
The Treasury Department recently took steps to pick up the pace. A modification to the Making Home Affordable program will take place on April 5, 2010. Although I personally think MHA has been relatively useless since its inception, it does seem to be picking up steam. The main problem is that only 83 loan servicers are participating in the "voluntary" program. This does include Wells Fargo, Bank of America, and Chase among other noted lenders. The industry anticipates Fannie Mae and Freddie Mac will adopt the new rule, which would include a large majority of home loans in the US.
The change simply requires lenders to respond to short sale offers within ten days. There is no reason precluding a short response time other than bureaucratic red tape and overworked negotiators. They can hire some more people and push problem loans out the door more quickly. Frankly, instead of using TARP money to boost profits, pay executive bonuses, and build new branches, they can use it to hire a few more worker bees!
The 10 Day Rule will encourage more buyers, who can't wait months for a decision, to pursue the excellent values available with short sales. Until now, many potential Short Sale buyers would quit considering any Short Sale after their first bad experience in the process (including my own daughter).
Couple the user friendly changes in Short Sales to the still active tax credits available to buyers, and you have a terrific opportunity to strike gold in purchasing a home. However, the window for the tax credit is closing quickly. Mortgages have to be approved by April 30 and funded by June 30 to qualify. That means you need to get with a lender NOW to get pre-qualified for a loan, then put on your track shoes to find a home QUICKLY in order to complete the process.
Interest rates are still very low, mortgage money is available for as little as 3.5% down payment (even 0% down for qualifying USDA loans in Pickens), there are programs available to pay your mortgage if you lose your job, and the inventory of homes available gives buyers a great selection.
There are no excuses for not buying a home in this market if you really want or need one.
