New Measures Could Boost Short Sales
If you?ve been considering buying a house through short sale ? where the lender agrees to sell a home for less than what is owed ? but are intimidated by the process, here?s some good news.
The long, arduous wait for short sales may get shorter.
According to a new rule by the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac, lenders are required to respond to short sale requests within 30 days. The rule also requires that borrowers be notified about the lenders? decision on the sale within 60 days. If lenders take more than 30 days to respond, they have to provide weekly updates to the buyers.
The new changes are expected to boost sales by encouraging buyers now discouraged by the short sale process. Currently, because of bureaucracy, it takes forever for lenders to retrieve permission from the borrower to short sale a property in trouble. Meanwhile interested buyers are left hanging on a decision.
Last year, the Ocean County Register reported a California Association of?Realtors? survey that showed that 67 percent of respondents were unsatisfied with the approval process of short sales. Real estate agents also said that four out of every 10 short sale transactions fail because of unresponsive lenders.
?FHFA and the enterprises are committed to enhancing the short sales and deeds-in-lieu process as additional tools to prevent foreclosure, keep homes occupied and help maintain stable communities,? said FHFA Acting Director Edward J. DeMarco in a release. ?These timeline and borrower communication announcements set minimum standards and provide clear expectations regarding these important foreclosure alternatives.?
The changes should provide a new bump to the housing market. In terms of the market, short sales are better than foreclosures for borrowers, lenders and the neighborhoods. Hopefully, FHFA?s intervention will ensure more distressed homes finding new owners through the short sale process rather than the ignominy of facing foreclosure.
Short Sales are Up
Even before the new rules were announced, there was some positive news from the short sale segment.
Short sales were up 33 percent in January when compared to the same year ago period, according to RealtyTrac. The market research firm also said that February numbers are expected to be encouraging. Lenders are more open these days to doing short sales because they are less harmful for the neighborhood and the lending institutions than foreclosures. Foreclosures, however, still continue to surpass short sales, but the tide seems to be turning, according to RealtyTrac.
More short sales ?is mostly a good thing,? ?said Ira Rheingold of the National Association of Consumer Advocates to the USA Today. The only concern, he said, ?is that homeowners may have to short sell after being denied loan modifications that would have enabled them to stay in homes.
Existing Home Sales Slide
Just when there?s talk about a housing market recovery comes some gloomy news from the National Association of Realtors?.
Sale of previously occupied homes in March fell 2.6 percent to a 4.48 million annual rate, signalling that the real estate market continues to be unpredictable. In February, that number was at 4.6 million, and economists in a Bloomberg News survey were expecting an increase to 4.61 million.
Even with the decline, home sales averaged 4.57 million homes in the first quarter. That?s ?the strongest showing since the second quarter of 2010, according to Bloomberg.
Strict lending practices, foreclosures and dwindling home values continue to impede home sales which in turn dampens the market?s recovery. There are some positive signs though. The median price of existing homes climbed 2.5 percent from $160,600 to $163,8000. Also, the number of first-time buyers, a demographic considered crucial for the market?s recovery, rose to 33 percent of all purchases last month. Homes facing foreclosure also declined at 29 percent of sales, compared to 34 percent the previous month, while home supply fell 1.3 percent in March to 2.37 million. A decline in supply helps stabilize prices while encouraging sellers to put up more homes for sale.
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