Banks do it, so why not the rest of us? That is the message not only from the famous liberal Grey Lady, the New York Times, cited in a previous post, but now also from the notoriously conservative Wall Street Journal in an opinion piece that has the right all atwitter.
What’s that, you ask? Both papers now, from the right and the left and really the middle, are proposing that homeowners wise up and get out of their upside-down mortgages. In short, both are advocating the strategic or voluntary short sale
To go further, in my view, if the nation is to survive this crisis, it’s very possible that short sales will soon be seen as not only the financially reasonable way out but also the most patriotic way out. Why’s that?
Recent figures indicate that 3.5% of all mortgages are already in the foreclosure process. That’s, of course, on top of the massive numbers of foreclosures that have already taken place. Add to those in the process another 9.7% of all mortgages which are now 90 days or more late and that’s an impressive 14% of all mortgages looking down the barrel of foreclosure. And, that’s not the end of it. An estimated 25% to 30% of mortgages in this country are upside down as homeowners owe more than their homes are now worth. That number is predicted to climb to over 40% in the near future.
What is the fastest way out of this mess? Obviously, the best way would be for the banks holding the mortgages to reduce them down to present value of the homes or at least somewhere close to the present value. Homeowners stay in their homes; banks keep collecting the mortgage payments. Banks are reluctant to do this. In fact, despite the government’s HAMP program offering significant incentives for banks to modify loans, banks effectively refused by merely tweaking loans or outright refusing to touch them.
Now, the U.S. Treasury has come out with a new program which went into effect March 1, 2010. Called HAFA [Home Affordable Foreclosure Alternatives]. the program is a blueprint or set of guidelines for banks on how to process short sales. Designed to expedite the excruciatingly slow process in place to date at most banks [you know who you are, Countrywide], this may finally break the logjam of distressed mortgages that is threatening the very stability of our country’s economy.
For anyone considering a short sale, strategic or otherwise, as a way out of a personal financial morass, this may be the best time to get underway. If you are considering such a move, call me and I’ll be glad to give you what advice I can.