WASHINGTON – Jan. 12, 2010 – The federal government is setting guidelines for short sales of homes, giving lenders a 10-day limit to respond to offers, freeing borrowers from debt and providing financial incentives to lenders.
The new rules seek to address the many criticisms of short sales and figure to play a significant role in South Florida, where distressed properties dominate the market as the housing slump meanders into a fifth year.
“The cloud could be lifted,” said Domenic Faro of the Fort Lauderdale Real Estate firm. “This could bring us back to some normalcy.”
In a short sale, the homeowner unloads the property for less than what’s owed on the mortgage, and the lender forgives the difference. Nearly half of all single-family mortgage holders in Palm Beach, Broward and Miami-Dade counties are “under water,” meaning they owe more than their homes are worth, according to third-quarter data from Zillow.com, a Seattle-based real estate firm.
While short sales are considered the perfect solution for “underwater” homeowners on the verge of foreclosure, the deals often drag on as lenders take weeks or months to respond to offers. Frustrated buyers walk away during the delays. In some cases, lenders insist that borrowers share in the financial loss, holding up the transactions even longer.
To speed up the process, the U.S. Treasury is calling for lenders to respond to short sale offers within 10 business days. Sellers are eligible for $1,500 moving allowances, and they will not be on the hook for repayment of any debt.
Also, lenders will get $1,000 to cover administrative and processing costs, while investors owning the mortgages will receive a maximum $1,000 for allowing up to $3,000 in short sale proceeds to be distributed to less senior lenders. Loan servicers participating in the Obama Administration’s Home Affordable Modification Program are required to follow the guidelines.
The rules do not specifically apply to loans guaranteed by Fannie Mae or Freddie Mac, which represent about half of all U.S. mortgage debt. The two government-run mortgage companies are working to finalize their own guidelines.
The Treasury plan, which must be implemented by lenders no later than April, is meant to help sellers like Dawn Sclafani, who has been waiting since October for her lender to approve a short sale offer on her Margate home. A buyer has offered $155,000, and she owes $233,000.
Sclafani, a 50-year-old psychologist, said she’s eager for the bank to approve the deal so she can put the experience behind her.
“I want to move on … but I can’t until somebody gives me permission to,” she said. “I’ve heard that this is a horrendous process. The banks are just not very cooperative. I do believe these new rules will help.”
U.S. Rep Ron Klein, D-Boca Raton, agrees, saying the guidelines are meant to make short sales “a more usable tool.” Klein points out the rules provide standardized paperwork for all short sales and give buyers and sellers a more reasonable time frame for whether or not the sales will happen.
But Klein and others say the government may have to increase the financial incentives. The $3,000 cap on short sale proceeds is not sitting well with second lien holders, who have been demanding more money from sellers, the first lenders and real estate agents in exchange for releasing their claims and allowing the short sales to proceed.
“This is a great program if all these mortgages had only one lien holder,” said Travis Hamel Olsen, chief operating officer for Loan Resolution Corp., an Arizona company that helps lenders complete short sales. “But many of these properties have two liens.”
Meanwhile, some local real estate agents remain skeptical of the guidelines.
Broward County agent Ron Rosen, who urged Klein last summer to push for new regulations, said he thinks “the banks will still play their little games with people and make life difficult for everyone.”
Edward Goldfarb of RE/MAX PowerPro Realty in Davie doubts the Treasury will enforce the new rules. “There’s no teeth to them,” he said.
A spokeswoman for the Treasury says it will hand down “substantial” penalties to lenders that don’t comply. They can include the withholding or reduction of payments and requiring improperly rejected loans to be modified.
Lenders have blamed short sale delays on the complicated nature of the transactions, sheer numbers of deals and on borrowers who don’t submit proper paperwork in a timely manner.
In many cases, the banks are not to blame, said Ward Kellogg, chief executive of Boca Raton-based Paradise Bank. Still, he thinks the guidelines are necessary to force lenders to clear the market of so many distressed properties.
“I think the pressure on (the banks) is a good thing,” Kellogg said.
Copyright © 2010 Sun Sentinel, Fort Lauderdale, Fla., Paul Owers. Distributed by McClatchy-Tribune Information Services.
Some stuck in homes are opting to improve.
TAMPA, Fla. – Jan. 8, 2010 – Many homeowners want to move but feel stuck by their mortgages, owing more on the house than they would gain by selling it.
So some are trying to make their old houses new through remodeling, for their own satisfaction or to boost property value.
Some home improvement projects hold value better than others, according to a new a report from Hanley Wood LLC, in cooperation with Realtor Magazine.
Homeowners used to add value with new cabinets, countertops and other home projects. Now, real estate agents say, their clients are reluctant to dump money into work that won’t add to the bottom line at sale time.
People itching for change are upgrading kitchens and bathrooms, adding master suites, expanding family rooms, buying appliances or simply painting or reflooring. Many are doing the simpler work themselves.
“They say if they can’t sell their home, they at least want a new kitchen or to make the home nicer,” said Jonathan Greaves of Greaves Construction in Tampa.
The smartest improvements are sometimes the least expensive, the Hanley Wood Report states, and exterior work may provide a greater return: Eight of the projects in the report’s top 10 for recouped costs are exterior replacement projects costing less than $14,000.
Door and siding replacements and deck additions returned more than 80 percent of project costs when the homes were resold, according to the report. A steel entry door replacement recouped 129 percent of its cost.
The report, Remodeling Cost vs. Value, compares construction costs with resale values for 33 midrange and upscale remodeling projects in 80 markets across the nation.
Other exterior projects in the top 10 include midrange vinyl and upscale foam-backed vinyl siding replacements. They returned about 79 percent of their construction costs. Window replacements – midrange wood vinyl and upscale vinyl – returned more than 76 percent of costs when resold.
Copyright © 2010 Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.
ORLANDO, Fla. – Dec. 7, 2009 – Despite having no luck selling their properties, homeowners in some parts of the country have clung tenaciously to their notions of the value of their homes.
Forbes magazine ranked markets it considered the most overpriced based on the ratio of the median initial list prices compared to the median list prices at the time the properties actually sold. It also factored in how long the properties stay on the market.
In addition, the magazine considered expert forecasts of price increases in the areas, which could be what encourages homeowners to price high.
The top 10 areas where Forbes found the most over-priced properties were:
1. Orlando
2. Miami-Fort Lauderdale-Pompano Beach
3. Jacksonville, Fla.
4. Baltimore-Towson
5. Chicago-Naperville-Joliet
6. San Antonio, Texas
7. Denver-Aurora
8. Tampa-St. Petersburg-Clearwater
9. Indianapolis-Carmel
10. Austin-Round Rock
Source: Forbes, Francesca Levy (12/03/2009)
© Copyright 2009 INFORMATION, INC. Bethesda, MD (301) 215-4688
Recent Comments