Monday, April 5, 2010

The short sale plan kicks in

The newest Obama plan to save us from the housing apocalypse has kicked in. This is HAFA, the home affordability forclosure "alternative" plan. In other words, "Ok, so you really can't afford that house you bought, now what". This is another voluntary plan for the banks to speed up short sales. It gives them a few buck, it gives the home debtors a few bucks and it gives any second lien holders a few bucks in return for letting the short sale go through.

There's already a bunch of articles in the news this week talking about the upcoming short sale tusnami.

Today the Administration's Home Affordable Foreclosure Alternative Plan takes effect, offering incentives to borrowers, servicers, investors and second lien holders to push short sales through the system. Yep, everyone gets a cut of government funds to get these troubled borrowers out of their homes and get them sold, even if the sale price is less than the value of the loan.

I find it interesting that before the plan even went into effect today, the Administration upped the incentives a week ago, doubling the amount of cash to $3000 offered as borrower "relocation expenses" and juicing the payoffs to the others as well. Of course they want to push short sales because of course they know that their modification program isn't working as planned.

But the biggest impediment to the plan is the lenders themselves, who have to weigh what's going to save them the most money and cause them the least bleeding on their books.

I'm also starting to hear rumblings among the number crunchers that the wave of foreclosures we keep hearing about is about to hit with a thunderous roar.

Servicers are ramping up the mod process and pushing those who don't qualify out the door more quickly than ever. A big jump in inventories, which we already saw last month, right in the midst of the Spring market will turn home prices on their heels.

8 comments:

Neudi said...

Hey X, do you have any additional links to these articles for reading? If you've come across some good ones.

"There's already a bunch of articles in the news this week talking about the upcoming short sale tusnami."

Neudi said...

Disregard, I really need to start paying attention to links on your posts. You know what they say about multi tasking now, you do everything badly.

VectorzSigma said...

in case you guys haven't read this one: http://seekingalpha.com/article/196979-are-strategic-defaults-fueling-consumer-spending

"On top of the negative equity issue, restrictions meant to help consumers are actually reinforcing this idea of strategic default. The past and current administration have both made it a priority to keep homeowners from being foreclosed upon whenever possible. Lenders are required to go through a series of bureaucratic steps before enforcing a foreclosure and many times this process takes several months to over a year to execute.
But the dark side of this process is that many homeowners are purposefully not paying the mortgage in a strategic decision to allow the foreclosure process to happen and in the meantime to enjoy having the extra spending money. "

Neudi said...

Vector, had that same conversation the other day after reading the article about the OC lady living for free for 3 yrs and took out a heloc for 90k. Not paying your bills is the new way to get rich.

golfer_X said...

I know a few people that are not paying the mortgage and using that money to pay down thier other debt. That way when they do short or get foreclosed they will be debt free and in a good psoition to come back quickly and buy again.

golfer_X said...

From Calculated Risk website,

From Diana Olick at CNBC: Foreclosures Are Rising

Yes, banks are ramping up loan modifications and ramping up short sales and ramping up deeds in lieu of foreclosure, but the plain fact is that as the systems are oiled, the loans are moving through faster, and the pig in the python is showing its face.

We won't get the [foreclosure] numbers until next week, but sources tell me they will likely be a new monthly record.
The foreclosures are coming! The foreclosures are coming!

Neudi said...

Hell, why not. The stigma of being a deadbeat is so 2007. Only fools like myself are actually paying my bills. Heck, my tenants had a BK 3 yrs ago and when I ran his credit it came back with a 680. Shocked the shit out of me.

Neudi said...

Whatcha talkin bout Hoenig?

http://www.businessweek.com/news/2010-04-07/hoenig-says-fed-should-consider-raising-key-interest-rate-to-1-.html

Foreclosure/Short Sales rising and interest rate hikes, ouch!