In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Mr. Paul, the Phoenix agent, was skeptical. “In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.”

There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal.

“You have one loan, it’s no sweat to get a short sale,” said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. “But the second mortgage often is the obstacle.”

Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.

“This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.”

But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser.

Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent.

Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer.

“A short sale provides peace of mind,” said Mr. Reddy, 32. “If you’re in foreclosure, you don’t know when they’re ultimately going to take the place away from you.”

Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said: “The place I’m in now is nicer and a little bigger.”

Make an offer on this home… Listed at 250,000.00 will consider all reasonable offers.

Hope that everyone is having great success in closing short sales as I have been able too. They definetly take time and can be frustrating dealing with the banks, but at the end of a successful closing we have helped another home owner avoid foreclosure!

Great article…

Despite having a bad wrap for often being slow and problematic, short sales are quickly becoming a preferred method to dispose of distressed properties and avoid foreclosure.

According to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions, short sales accounted for a substantial 15.9 percent of home purchase transactions in January. This was well above the share of other distressed property activity – with damaged REO accounting for 13.4 percent of activity and move-in ready REO making up 13.8 percent.

The January figures represent a steady increase in short sale popularity. As recently as November of 2009, short sales accounted for 12.4 percent of the home purchase market, according to the Campbell report, behind move-in ready REO at 12.6 percent and nearly even with damaged REO transactions at 12.3 percent.

Short sales are an effective method of resolving mortgages in default, both for large lenders and for the government agencies supporting lenders’ efforts. Short sales typically result in lower lender losses and houses left in more saleable condition.

In addition, borrowers that agree to a short sale escape the bad credit marks of a foreclosure and can often buy another house with mortgage financing after only two years. For borrowers going though the foreclosure process, mortgage financing can be unavailable for a period of five to seven years afterward.

Short sale properties are most often purchased by first-time homebuyers, the January survey results revealed. Currently, mortgage servicer approval on offers

The process of  doing the HAMP program or the HOPE For Homeowner’s  has had its hurdles and often times when a person is thinking they are able to do the trial loan modification after 90 days they find out that they have been denied and now the banks are putting them in a position where the owner now has to list their home.

This is a great resource and link to find out if you can qualify for this opportunity http://makinghomeaffordable.gov/modification_eligibility.html if anyone has any questions please feel free to call me at 206-963-5525 or email me: margomba@hotmail.com knowing what you have available is very important as this is only for a short period of time, so take advantage of it while you can.

Having done over 1,000 BPO’s and CMA for banks I would be glad to let you know what the value of your home is today.

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  WSHFC State Bond Seminar Class, it is going to be on Friday May 29th 2009 at the Richmond Beach Library in Shoreline, WA.  class starts at 12:30PM for reservations please contact Laurie at 206.852.3835 to confirm your spot.

These do fill up quickly as the State Bond assists you with your downpayment or your closing costs.  We actually have alot of fun… see you there. 

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 Finding homes that are negotiated for our clients, they really appreciate it… look for their future pictures and testimonials next month so stay tuned!

Remember there is an extra incentive that is available to First Time Home Buyers!!! The new stimulus package bill signed by President Obama for first time home buyers.

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“Find someone who has achieved the results you want and copy what they do and you’ll achieve the same results.”

Anthony Robbins

The girls did it again, taking second place in the small co-ed division at the Washington Interscholastic Activities Association (WIAA) State Cheer Championships on Saturday, Jan. 24 at the Comcast Events Center in Everett.

http://www.enterprisenewspapers.com/article/20090211/ETP04/702119929/0/ETPZONESHL here is the link to the newpaper the girls were in.  Good Job ladies!

Buy a house

Where are you guys?  Stop listening to the news…..if you would like to buy a home now would be the time.  There is so much to choose from.  Short sales, non short sales…foreclosures and REO’s….The rates are great, if you have a good job and you have been there for the last 2 years and you have some reserves in the bank…come on!  Work with an agent and get a home.  People do not understand that you pay rent anyways why not own your own home. Please feel free to give me a call if you have any questions.

As is the dazzling photo above, you too can add sparkle by purchasing your own home.

Make a New Years resolution to step outside the box and do not be afraid to go get what you want!

Loan Mods

Many of us are seeing a new trend in the mortgage market out there, it is called a Loan Modification. Here is a link http://www.hud.gov/offices/hsg/sfh/nsc/faqlm.cfm to where you can get some free information. With the lending world tightening down their restrictions, higher credit scores, more reserves, lower DTI, and then the old appraisal issues with the value of your home, this is another opportunity.

To read more go to David Haley’s Blog @:http://www.lendingonrealestate.com/MyBlog?CertContactID=19920810&CampElementID=1012310