I saw another NY Times article that mentions a customer who owed $205,000 and had a prospective buyer willing to buy the property at a short sale for $200,000. The bank refused the short sale and wanted to foreclose the house even though the surrounding values come in at $190,000. After the foreclosure, the bank will be lucky to get the $190,000 and will wind up paying more fees to get rid of the REO. What is the incentive for the bank to take a bigger loss?
This customer did what most people do and unfortunately it was the wrong thing to do. She drained her retirement account to keep the house current after she lost her job. I would have recommended she stop paying all her credit cards and mortgages after a job loss and start preparing for hard times. New shelter and frugal living should be her priority as she searches for a a new job. There are people who have been out of work over 99 weeks which is how long Congress has extended unemployment benefits.
PHOENIX — Bank of America and GMAC are firing up their formidable foreclosure machines again today, after a brief pause.
But hard-pressed homeowners like Lydia Sweetland are asking why lenders often balk at a less disruptive solution: short sales, which allow owners to sell deeply devalued homes for less than what remains on their mortgage.
Ms. Sweetland, 47, tried such a sale this summer out of desperation. She had lost her high-paying job and drained her once-flush retirement savings, and her bank, GMAC, wouldn’t modify her mortgage. After seven months of being unable to pay her mortgage, she decided that a short sale would give her more time to move out of her Phoenix home and damage her credit rating less than a foreclosure.
She owes $206,000 and found a buyer who would pay $200,000. Last Friday, GMAC rejected that offer and said it would foreclose in seven days, even though, according to Ms. Sweetland’s broker, the bank estimates it will make $19,000 less on a foreclosure than on a short sale.
“I guess I could salute and say, ‘O.K., I’m walking, here’s the keys,’ ” says Ms. Sweetland, as she sits in a plastic Adirondack chair on her patio. “But I need a little time, and I don’t want to just leave the house vacant. I loved this neighborhood.”
GMAC declined to be interviewed about Ms. Sweetland’s case.
The halt in most foreclosures the last few weeks gave a hint of hope to homeowners like Ms. Sweetland, who found breathing room to pursue alternatives. Consumer advocates took the view that this might pressure banks to offer mortgage modifications on better terms and perhaps drive interest in short sales, which are rising sharply in many corners of the nation.
But some major lenders took a quick inventory of their foreclosure practices and insisted their processes were sound. They now seem intent on resuming foreclosures. And that could have a profound effect on many homeowners.
In Arizona, thousands of homeowners have turned to short sales to avoid foreclosures, and many end up running a daunting procedural gantlet. Several of the largest lenders have set up complicated and balky application systems.
Concerns about fraud are one of the reasons lenders are so careful about short sales. Sometimes well-off homeowners want to portray their finances as dire and cut their losses on a property. In other instances, distressed homeowners try to make a short sale to a relative, who would then sell it back to them (a practice that is illegal). A recent industry report estimates that short sale fraud occurs in at least 2 percent of sales and costs banks about $300 million annually.
Olivia Wilde
Megan Fox
the only way we can stop foreclosure is that the debt is never written off the books. debt is final when paid of to last dime. that's how bank and owner takes responsibility for every action and trust me the price is not skyrocketing like it has done in the past if my way isn't the highway.. we probably wont see book writers on late night commercials then either. but this system we have now is just making bucks in the banks pockets because they don't pay interest on their money so they're practically getting the house free meanwhile folks are selling kids used toys on ebay t afford the water bill. when is government gonna be voted out so we can set the banks into paying % on the bailouts??
ReplyDeleteBanks short sales