A couple of weeks ago I posted an article that included a chart that showed that there are still a boat load (over a million) Adjustable Rate Mortgages that will reset between now and 2011. You can re-read that article here.
Many experts believe the Fed Rate will hold steady through most of 2010 and therefore, the number of mortgage resets may not see huge jumps. Many of these mortgages are tied to properties that are upside down, meaning the property value is less than the mortgage, and that will be the primary reason for increased defaults — or it will at least make these properties prime candidates for short sales.
Real estate investors can attest to how hard it has been to get lenders to let go of their inventory, and if you specialize in short sales, you know that at times, waiting for a short sale response from a lender is a lot like watching grass grow.
Relief May Be On The Way…
In the article U.S. Treasury set to finalize home “short sales” plan,Reuters suggests that there may be some help on the way. It seems that the Government sees the looming train wreck and also knows that if they don’t get these short sales moving through the pipeline by incentivizing the lenders, the number of predicted foreclosures (on top of the countless others that are currently out there) will become a reality.
So, what does this mean to investors?
I sure hate to go out on a limb, but perhaps this will be just what is needed to get lenders to open the flood gates and start to move some of their inventory.
Will it happen? We’ll see.
For all of you specializing in short sales, keep us posted.
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Article Author:
Peter GiardiniPeter has written 11 articles for us.
Visit Peter's Website: http://www.theclubmastermind.com
Peter is an active and successful real estate investor in the Baltimore Maryland region for the past 8 years and is one of the founders of The Club Mastermind a real estate investing coaching program focused on local coaches helping investors to perfect their game.
Joshua Dorkin
Charles Feldman
Ted Karsch.
{ 4 comments… read them below or add one }
Of course nobody will grab for the obvious solution to the problem. The banks have been needing some good regulation for a long time, but since the reds were in charge for so long, regulation goes out the window in favor of massive massive profits. How many people would not lose their houses if BoA didnt have to pay their CEO $1M to retire early?
-Tyler
Portland Real Estate´s last blog ..About Ambassador condos
Tyler,
We could argue and place blame all day long… the bottom line is this…
When overwhelming greed at every level figures out how to manipipulate within the rules and regulations, disasters like the one we are living through are bound to happen.
Great article! It is true that short sales are tricky. There are so many entities involved: seller, buyer, realtors, lien holder (maybe 2), and then the mortgage servicer.
Servicers are not setup for dealing with short sale paperwork. Furthermore, they are heavily regulated by State Banking Agencies.
One real problem is when the short sale offer is lower than the amount of the outstanding loan amount. And if there is a 1st and 2nd note – how are the funds divided up?
It will be interesting to see how the Fed Govt attempts to streamline this process. After a lackluster loan modification campaign, the short sale effort is the next best thing to preempt foreclosures on single family homes that will certainly ruin household credit scores for years to come.
As always, the Single Family Home Investor will continue to prevail by creatively finding ways to get homes in spite of overwhelming regulation and manipulative banks that continue to maintain a shadow inventory.
Bernard,
Great comments… it will be interesting to see how this part of our industry shakes out.