After a lot of time thinking about creating this blog, or more accurately procrastinating about creating this blog, I have...finally created this blog!
My intent here is to provide comment, some entertainment but above all some useful information for home owners: those seeking loan workouts, those fearful of foreclosure and those facing foreclosure, and those considering shortsales and deeds-in-lieu of foreclosure. You can check the bottom of this post to decide whether my bona fides for setting my self up to comment on these matters qualify me to...comment on these matters.
If I am successful in accomplishing my aforementioned goal, I expect this will become a lively blog with comments by homeowners, real estate agents, mortgage brokers, investors some of those folks who work in the Loss Mitigation and Workout Departments for Lenders and Loan Servicers and maybe even a Trustee or two.
Ok enough of that. Now some very important information. This is big and I mean REALLY BIG NEWS for homeowners facing foreclosure.
I learned somewhat belatedly today that a potential earth shaking policy statement was issued by Fannie Mae on June 25th. (Learned courtesy of CinOC on the Short Sale Think Tank Forum on www.easyhud.com, kudos to Chris Daigle. As far as I can tell this is the premier site for investors for real short sale information without having to wade through some Short Sale Guru's "get rich doing short sales" pitch. )
So how did Fannie Mae announce this BIG NEWS? Well they didn't buy TV ad's trumpeting the event, at least that I am aware of. They did it the way large bureaucratic institutions usually do things, by issuing a bland policy statement. This earthshaking information is found in the Announcement 08-16 published by Fannie Mae at the end of June. (link https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0816.pdf )
In brief the Announcement says the following:
Mr. Homeowner, if you do a short sale, we will let you buy another house in as little as 2 years. If, however, you give a deed-in-lieu of foreclosure to your lender, we will make you wait at least 4 years before you can buy another house. Now, if you do nothing and wait for the house to be sold at the foreclosure auction, you will have to wait at least 5 years and maybe as many as 7 years before you can buy another house.
(A little inside baseball: Fannie Mae has settled a raging debate among Investors as to whether there is an advantage to the homeowner to doing a Short Sale vs a deed-in-lieu of foreclosure or a fulll foreclosure sale. No more debate: Short Sales win hands down over deeds-in-lieu and full foreclosure.)
it makes sense that action taken to minimize the lender's loss (short sale) should be preferable to taking minimal action (deed-in-lieu), or no action (letting the house go to foreclosure). But the credit reporting agencies heretofore have given no "credit" for having taken action to mitigate the lenders loss, reporting Short Sales, DIL's and Foreclosures identically. Expect that to change.
It is hard to underestimate as well as difficult to know the full impact of this distinction by Fannie. Fannie, as the biggest purchaser of mortgages on the Secondary Marekt Set's the Standard (ever hear of a "conforming loan? That means it meets Fannie Mae standards, and whether the loan is actually purchased by Fannie, the fact that it could be pretty much guarantees it's marketability.)
As far as unintended consequences of this policy go: let your imagination run wild.
One of the unintended consequences I anticipate stems from the work we do everyday with homeowners who are upside down on their mortgages and who are seeking modifications of their existing loans in order to hang on to their homes. I believe many of these homeowners are afraid that if they lose the home they are in, by whatever means, they will never be able to buy another one. In many cases, these homeowners are willing to put themselves under enormous financial and emotional stress working 2, 3 even 4 jobs in an effort to keep their homes.
When they find out that they may be able to buy another home in as little as two years, I think we will see a tsunami of Short Selling (in case you don't think we've seen one already). Hmmm!? maybe that will really be the bottom of the Sub Prime Mess.
Think about it, though: Mr and Mrs homeowner are struggling to make payments they can't afford. Meanwhile their credit is getting hammered from various missed payments and they're borrowng from every place they can just to try to pay their mortgage. Suddenly they learn they can dump their house which is worth $50,000 less than they owe, wait two years and buy a house that' will be worth what they pay for it. What would you do?
Mike Davis is a Real Estate Agent with Davis-Resnick Group, LLC in Annpolis Maryland affiliated with Keller-Williams Crossroads and does Loss Mitigation, Short Sales and Loan Workouts through Equity Loss Mitigation, LLC. Mike has more than 20 years experience in Real Estate Sales, Managment and Business Operations. You can reach Mike Directly at mdavis@equitylossmitigation.com
Comments