New Plans to streamline short sales coming out of Washington

I really would like to believe that our Government has the ability, understanding and foresight to get us out of every mess – but history speaks for it’s self. We all have had that sweet old “Auntie” (or someone like her) who thinks that they know what’s best for us and who is always chiming in with their advice and point of view (no matter how irrelevant or out of touch that it may be) . I’m afraid that it seems that our Government and the U.S. Treasury Department has now gone from being our strong and dependable good ole’ Uncle Sam, to that dear, sweet (but mostly out of step) “Auntie” who has no real idea of how things in the real world work, but insists on telling us how we can fix our problems and live our life’s.

Point in case - the Treasury Department is currently taking steps to work with lenders in order to help streamline the short sale process, which is encouraging, because as for those of us who are committed to helping homeowners who are upside down in value – we all know too well, the horrendous lack of uniform procedure and common sense on the part of the investors and servicers.

Last week the treasury department announced new guidelines aimed at easing the short sale process. Under these new guild lines, the Jr lien holder (2nd mortgage/equity line) must agree to only $3000 as payment in full. I like the idea of formatting the process but come on! What works for one inventor’s situation isn’t going to work for all – here’s what I’m talking about. In my market we saw homes appreciate to the point were the average sale was in the mid to high $500,000 range, many homeowners experienced such huge equity increases that they in turn took out big equity lines of credit.

So now that homeowner is in default with let’s say has a $150,000 line of credit, the junior lien holder has two choices:

Retain the rights to a deficiency judgment upon foreclosure
OR
Sell the deficiency rights for 10% (or more) to a creditor as a charge-off prior to or after foreclosure…

So my questions is -- why would they take $3000 as payoff?

In the above example, the junior lien holder could get $15000 from a collector so why would the settle for $3000? The far better idea, in my opinion would be to limit the amount a 2nd lender can receive to a percentage of he loan. This would have a greater chance of success on a national level and would make the necessary allowances for the regional price differences that currently exist.

Only time will tell if these new guidelines will do anything to help the short sale process, or turn out to be just another pacifier offered to quiet and soothe the large group of upside down homeowners desperate for answers, clarity and above all, some real help!

In the mean time, I can’t get too excited about what is coming out of Washington right now, but I can and will continue to help educate homeowners in Ventura County who need assistance negotiating their short sales so that they can sell, move out and move on.