Short Sale Predictions for 2010.                                                  The Number of Short Sales Will Double

The number of short sales will double in 2010

Chicago Short Sale Housing Economist have predicted that un upturn in Chicago Short Sales could also provide an unexpected lift to home prices in 2010.  Taking into consideration recent lender behavior, increased staffing in Loss Mitigation departments, and Obama's push to encourage Short Sales, it is likely that 2010 could be the year of the Short Sale.  

Boston Globe article reports "Short Sales gets boost from Obama administration"  December 2009

Short sales get boost from Obama administration

Posted by Rona Fischman December 2, 2009
Welcome back to Attorney Richard D. Vetstein. Here's Attorney Vetstein's take on the Home Affordable Foreclosure Alternatives Program.

The Obama administration on Monday set long-awaited guidance on a plan for mortgage companies to speed up short sales of homes and other loan modification alternatives to stem the rising tide of foreclosures. The Home Affordable Foreclosure Alternatives Program provides financial incentives and simplifies the procedures for completing short sales, a growing practice in which a lender agrees to accept the sale price of a home to pay off a mortgage even if the price falls short of the amount owed. The announcement can be found here.

The new federal guidelines address barriers that have often sidelined short sales by setting limits on the time it takes a bank to approve an offer, freeing borrowers from debt and capping claims of subordinate lenders. New financial incentives for completing short sales or similar “deed-in-lieu” transactions -- in which the deed is simply transferred to the lender -- include a $1,000 payment to servicers, and a maximum of $1,000 to go to investors who sign off on payments to subordinate lien holders, the Treasury said. Borrowers would also receive $1,500 in relocation expenses.

While a short sale may be preferable to a foreclosure, they have been frustrating for borrowers, buyers and Realtors, because they are often hung up by lengthy negotiations with multiple lien holders and mortgage insurance companies. Realtors have complained that sales fall through as lenders bicker over the sales price, what they should receive from the proceeds, and whether the borrower will be held accountable for the debt in the future.

Under the new rules, mortgage servicers have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt. The rules also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.

Ostensibly, the federal guidelines apply only to banks and lenders subject to federal banking oversight. That means big boys Bank of America, JP Morgan Chase and Wells Fargo, but not necessarily local and state chartered banks who remain free to be as unreasonable as they want in short sale transactions.

This will help, but by how much remains to be seen.