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Will Short Sales Increase?

Short sale guideline changes

Fannie Mac and Freddie Mac, the federal housing departments responsible for the majority of loan funding in this country, announced that on Nov. 1st the guidelines for short sales would change. The changes, outlined here in my blog , were aimed at making short sales easier to complete and to allow more sellers to qualify to participate in them.

Of all of the changes supposedly put into action on Nov 1st, the one that will have the biggest impact will be the removal of the requirement to be delinquent on your mortgage. Did it ever make sense to require someone to miss a payment on a home they were already upside down on and facing a financial hardship which would strip them of their ability to pay? I think it makes sense to remove this requirement. Why would the bank, who is going to lose in the short sale process, want to tell the seller to skip 60 days worth of payments? It made no sense.

 

What are your thoughts? Do these changes seem to be a positive for the real estate industry or do you think it will further drive prices down?

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Karl Schuub December 06, 2012 at 05:38 PM
Once again the gov gets involved where they have no business. Those entities are designed to run standards through the industry and purchase bulks of loans...it's the same crap that caused our economic meltdown in the first place. It just means that the taxpayers are on the hook for the balance of any loan in which the borrowers just walk away regardless of whether they can pay or not. I'd like a guarantee that my 401k always creates wealth and I'd like the gov to make that happen - and...make the taxpayers make up the difference if it doesn't happen. If that sounds absurd to you I assure you this is no different.
Karl Schuub December 06, 2012 at 06:48 PM
This is a chicken or egg first argument. Bad loans wouldn't have existed in the first place had the government not decided they could manipulate the markets (banks) by basically creating an opening for banks to sell (to both Fannie and Freddie) loans to whatever standards these quasi-government bodies would sanction. The banks were only doing what the government wanted them to do in the first place- that is reduce the standards for qualification to allow for people that shouldn't have had loans in the first place. Explain to me how the government belongs in the home loan business? Also explain to me why it's the governments business to basically guarantee short sale losses to be made up by the taxpayer? Where is the authority?
Karl Schuub December 06, 2012 at 07:50 PM
Wars, Reagan and deregulation have nothing to do with the financial collapse that was triggered by a scheme devised by bankers to wrap mortgage backed securities into bundles and sell them. They weren't wrapping eggs for sale, nor bicycles, nor yo yos, they were mortgage backed securities; most of which ended up being bad loans. The loans had to exist before they could be bundled - only a fervent agenda-driven dolt would continue to blame solely the banks. The gov manipulated banks in two ways, first by driving ill-advised underwriting standards, and then by purchasing these same ill-advised loans...then foisting them into the open marketplace where financial firms created thier own ill-advised scheme. If you don't see the gov has dirty hands in this you need a wake up call.
Karl Schuub December 06, 2012 at 08:01 PM
Fannie and Freddie shouldn't even exist.
Tim Montoya December 06, 2012 at 08:03 PM
Government needs to get out of it completely. Private lenders would pony up the funds and dictate their own terms. When government regulation is involved, there will always be those who look to get around it or manipulate it. Why try to fix a mess you created? Let the market correct itself and stop trying to save everyone from themselves. If GM had gone under, there would have been someone there to buy up their information, inventory and hire their employees. The result would have probably been a more affordable product not strapped by the union.
Karl Schuub December 06, 2012 at 08:13 PM
Couldn't agree more - the market will create an equilibrium if allowed. To continue to manipulate through the creation of quasi-government entities, or tax policy, or outright handouts only messes with the health of the whole of the economy. It is no surprise that 2 years after the government took over student loans the entire thing is out of control. The government showers the market with opportunity with no mechanism for tempering excess. The private markets have always demonstrated a superior ability to provide opportunity.

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