TEAM EMPOWERMENT MORTGAGE CHATTER: Dec 29; NYE Plans; Gov’t Reviews Foreclosure-Rental Program; Best Post of 2011: Short Sales; 7 Cities Where List Prices are Falling The Most; Take Advantage of The Winter Market

“All you need is the plan, the road map, and the courage to press on to your destination.”

— Earl Nightingale: was an American motivational speaker and author




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The Federal Housing Finance Agency (FHFA) received more than 400 proposals on how it should handle the high number of foreclosures that are plaguing many markets across the country. The proposals suggest various ideas on how the FHFA can go about turning thousands of repossessed homes that Fannie Mae and Freddie Mac own into rentals, in trying to curb losses, stabilize neighborhoods, and prevent further drops to housing values.

Fannie and Freddie service more than half of all U.S. home mortgages so any foreclosure-to-rental program could have a significant impact on the housing market, real estate experts say. The FHFA received more than 4,000 submissions during its call for proposals — however, only about 10 percent were deemed valid, the agency said.

“FHFA is proceeding prudently but with a sense of urgency to lay the groundwork for the development of good initial transactions in early 2012,” Corinne Russell, an FHFA spokeswoman, told Bloomberg. FHFA has declined to discuss specific submissions or a timeline for the program.

But proposals for the foreclosure-rental program reportedly documented joint-venture partnerships, sales, and auctions.

As of Sept. 30, Fannie Mae has 122,616 foreclosures with a carrying value of $11 billion — costing Fannie $733 million to maintain in the third quarter alone, according to a Securities and Exchange Commission filing. Meanwhile, Freddie Mac owns 59,6161 foreclosures, costing it $221 million to operate and manage in the third quarter.



Short Sale Vs. Foreclosure: A Short Sale Always Wins

Today’s ever changing real estate industry has brought upon some very challenging questions from our clients. We as counselors, want to put forth the best, non-emotional advice that we can, in hopes that we can help our clients and their families navigate the rough waters of the short sale process.

The most prevalent question and one that continues to permeate the industry is:

“Why should a seller go through the short sale process rather than letting their house be foreclosed upon?”

While we cannot speak to every client circumstance, we can say one thing with complete conviction. In almost all instances in which a potential seller is contemplating whether they should short sell their house or let it go through the foreclosure process, a short sale is the better option. The following are examples to consider:

Example A- Short Sale

Mr. Smith owns a home in which he has a mortgage balance of $220,000 and a current market value of $150,000. Mr. Smith has elected to short sell his property. His Realtor successfully obtains a buyer who puts forth an offer price of $120,000 (80% current market value according to Realty Trac Foreclosure Report 5/26/2011). After reviewing the buyers offer and the financial hardship information from Mr. Smith, Mr Smith’s bank agrees to accept the short payoff of $120,000 which would leave a deficiency balance of $100,000.

The transaction closes and is final. Mr. Smith then pulls his credit report 30 days after the transaction takes place. On the report he notices that the mortgage trade line states “Mortgage debt was settled for less than full” and the balance on the mortgage is $0. Mr. Smith is now on the road to financial recovery.

Example B- Foreclosure

For the ease of illustration we will use the same value and mortgage debt amounts as in Example A. However, Mr. Smith has elected to forgo the short sale process and let the bank foreclose on the property. The bank holding his mortgage facilitates the proper legal procedures to foreclose on the property, all of which are costly. Mr. Smith is notified and his property foreclosed upon of which is taken back by the bank to sell as an REO.

Six months later, the bank finally sells Mr. Smith’s home only they sell it for $90,000 (60% of current market value according to Realty Trac Foreclosure report dated 5/26/2011). Remember, as a short sale, the home would have sold for $120,000 keeping the deficiency to $100,000. In addition to the deficiency now being $130,000, the bank has elected to add on legal costs of $15,000 and asset preservation costs of another $5000 for a total deficiency liability of $150,000. Mr. Smith pulls his credit report 30 days after being notified that the bank has sold his property and of his liability.

On the report he notices that the mortgage trade line states “Foreclosure” and the balance is $150,000. Because of Mr Smith’s choice to choose foreclosure vs. short sale his road to financial recovery has taken a major detour. He not only has a foreclosure on his credit report but now has a much larger deficiency balance in which the bank, in most cases, will report on his credit report as a balance owed.

The Best Option is Clear

While the financial and credit advantages are clear when choosing a short sale over a foreclosure, other advantages are sometimes overlooked. The most important of all of them is maintaining the seller’s dignity and peace of mind. We have heard too many stories of families having to leave their homes because of a Sheriff’s order or some other type of legal action. The short sale process alleviates this negative social impact. The process puts the control back in the seller’s hands so that they can get back on the road to financial recovery and start providing for their families. In the battle of the two evils, a short sale always wins!!!



Nationally, median list prices have mostly been flat since June, but some markets are still seeing some decreases in home prices, according to the latest data from of 146 metro markets.

The following are the cities where list prices have fallen the most from October to November:

1. Detroit

• Month-over-month decrease: -4.61%

• Year-over-year decrease: -12.47%

• Median list price: $84,900

2. Monmouth-Ocean, N.J.

• Month-over-month decrease: -4.32%

• Year-over-year decrease: -3.05%

• Median list price: $300,444

3. Santa Barbara-Santa Maria-Lompoc, Calif.

• Month-over-month decrease: -3.52%

• Year-over-year decrease: -1.95%

• Median list price: $539,250

4. Pueblo, Colo.

• Month-over-month decrease: -3.45%

• Year-over-year increase: 0.29%

• Median list price: $139,900

5. Tulsa, Okla.

• Month-over-month decrease: -3.38%

• Year-over-year decrease: -5.34%

• Median list price: $140,000

6. Peoria-Pekin, Ill.

• Month-over-month decrease: -3.18%

• Year-over-year increase: 3.71%

• Median list price: $139,900

7. Charleston, W. Va.

• Month-over-month decrease: -3.09%

• Year-over-year increase: 6.67%

• Median list price: $159,900



“There’s a misunderstanding that winter is quiet,” Andrea Webb, an agent with Keller Williams in Montclair, N.J., told The Star-Ledger (New Jersey) in a recent article.

Real estate pros report that the weeks between now and the Super Bowl can be some of the most hectic in getting a head-start on what’s traditionally considered the busy spring buying season.

“Most good associates use the months of November and December as an opportunity to get organized for the coming spring market, which can arrive as early as January,” Gary Large, president of the New Jersey Association of REALTORS®, told The Star-Ledger.

More real estate pros reportedly recommend to their sellers to host open houses during the cooler months because they’ll face less competition. Also, they say, more serious buyers often come out during the winter months, such as corporate clients who are needing to relocate within the first quarter of the year.

“We try to encourage the sellers to pretty much get their house on the market early in January to beat the rush, because most people tend to wait until the spring,” Marilyn Bailey with Prudential New Jersey Properties in Morristown, N.J., told The Star-Ledger. “It’s a nice time of year to shop — not as many buyers are out there, so you’re not competing with other offers as much.”

Real estate pros are also using the winter months to focus on networking (such as through holiday parties that can create plenty of opportunities for meeting new clients or gaining referrals) and taking continuing-education classes to ramp up their skill sets before the spring buying season hits, agents report.



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