Over the last few weeks I’ve run across a few articles what the future holds for the large number of homeowners in default or about to go into default and facing foreclosure.   Many experts expect to see a big increase in successful short sales.  While I’m not a national expert, I am a full time Realtor trained in working with distressed property owners.  As such I keep a close eye on the direction of the distressed market is going .  I try and analyze what’s working for distressed homeowners and what’s not working.  From my point of view it does look like 2010 will be the  Year of the Short Sale.

2009 might be called the year of the foreclosure.  It might also be called the year of the failed mortgage modification.   Foreclosure activity hit highs in the summer of 2009.  In my blogs on Shadow inventory you can see the trend. Foreclosure activity peaked in July and the trend has been downward.  Unfortunately foreclosure sales are not keeping pace with number of defaults.

Also during 2009 the Obama administration introduced the “Making Home Affordable” campaign.   This program was all about keeping people in their homes through refinancing or loan modification.   As part of the Making Home Affordable program many banks signed on for the  Home Affordable Modification Program (HAMP).  HAMP gives lenders incentives for modifying loans for trouble home owners.   The aim of HAMP is laudable, but the results have been disappointing.    Some say the program is poorly designed, others blame the lenders, but another fact is undeniable. Many homeowners in distress cannot afford to stay in their home even if the loan payments are lowered significantly.  Eventually, these homes will be sold.

After several months of poor progress of the HAMP program, the administration announced a new directive to HAMP participants as part of the Making Home Affordable program.  This new directive is called Home Affordable Foreclosure Alternatives ( HAFA).   HAFA gives incentives to banks for Short Sale and Deed in Lieu of foreclosure.  The directive goes into effect April 5, 2010.  Lenders can choose to participate before April 5.   In most cases Short sales and Deed In lieu are much more cost effective than foreclosure for lenders.  In basic terms; Short sales and Deed in lieu make more sense than foreclosure! Unfortunately, short sales too often end up in frustration and foreclosure.   Many Realtors acting as buyer agents will discourage buyers from making offers on short sales for this reason.

So what’s different in 2010?

Besides the HAFA directive, there are  other factors that point to an increase in short sales in 2010.

• Major mortgage servicers like Wells Fargo  have been ramping up the number of people working with distressed home owners. In a December 10, 2009 press release Wells announced, “The company has worked to improve responsiveness to its customers and improve its overall operating process through efforts such as increasing home retention staff by more than 7,600 people in 2009 – for a total of 15,000 U.S.-based staff – to manage the increased home preservation volume.”     Even Bank of America, which has a terrible reputation regarding short sales has promised to streamline its short sale process.
• Realtors across the country are becoming better trained to help home owners.  The Certified Distressed Property Expert (CDPE) Institute recently announced that 19,000 people have completed their training course and are now CDPE members.  The National Association of Realtors (NAR) has also begun a certification program called Short Sale and Foreclosure (SFR) Certification.
• Political pressure is ramping up big time!  Everyone is aware of the anger over the housing collapse.  With congressional elections coming later this year, there is pressure to show results. With so many loan modifications failing the  alternative with the least pain for homeowners, lenders and the housing market would seem to be a big increase of short sales.

What should a homeowner in trouble do?

First of all take  action! Learn your options.

• Avoid foreclosure scams-never pay up front fees!
• Check out the Making home Affordable website: http://makinghomeaffordable.gov/
• Find a free local housing counselor through The Minnesota Home Ownership Center
• Attend a free Seminar put on by a top notch CDPE short sale expert.  Our team is sponsoring two of these events check them out on this site.                          How to Avoid Foreclosure Seminars
• Down load helpful information from my short sale site.

The  Minnesota Real Estate Team is dedicated to solving the Foreclosure crisis one homeowner at a time.

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