This is wonderful news for homeowners! Finally, the banks are getting it….Foreclosures hurt everyone! Short Sales help the Seller, the neighborhood and the city!
Great Read …..
Short sales of U.S. homes rose to a three-year high in the first quarter as banks agreed to let more borrowers unload property at a loss, putting the transactions on pace to surpass deals for foreclosures, RealtyTrac Inc. said.
Sales of homes in the pre-foreclosure process increased to 109,521, up 25 percent from a year earlier and the most since the first three months of 2009, the Irvine, California-based data service said today. Most of those transactions were short sales, in which the lender agrees to a price that’s less than the mortgage balance. The number of bank-owned homes sold during the quarter fell 15 percent from a year earlier to 123,778.
“By next quarter nationwide, we’re actually going to see the number of pre-foreclosure sales outnumbering bank-owned sales,” Daren Blomquist, RealtyTrac’s vice president, said in a telephone interview. “It’s a paradigm shift in the way lenders are dealing with their distressed loans.”
Lenders are stepping up short sales to reduce losses, take advantage of government incentives and avoid legal challenges to foreclosures as they struggle with non-performing mortgages, he said. The transactions, which peaked at 128,000 in the first quarter of 2009, declined after President Barack Obama’s administration pushed loan modifications to help borrowers keep their houses, according to Blomquist.
Pre-foreclosure homes, or those that had received a default or auction notice, sold for an average $175,461 in the first quarter, with an average discount of 21 percent compared with properties not facing seizure, RealtyTrac said. The average discount was 16 percent a year earlier.
“Lenders are approving more aggressively priced short sales, which in turn is resulting in more successful short-sale transactions,” RealtyTrac Chief Executive Officer Brandon Moore said in the report.
Homes that went through to foreclosure sold for an average $147,995, or a 33 percent discount relative to non-distressed properties. The median price of an existing home was $177,400 in April, up from $164,800 in March, according to the National Association of Realtors.
The five largest U.S. mortgage servicers, including Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) (JPM), agreed to pay $25 billion in February to settle allegations they wrongfully repossessed homes. The deal, which requires banks to produce evidence before seizing property from a delinquent borrower, was expected to trigger a wave of foreclosures that hasn’t materialized, Blomquist said.
“Instead of seeing 1 million properties being repossessed, we’ll see more like 700,000 to 800,000 properties repossessed by banks and an increase in short sales,” he said. “In effect, homeowners are still losing their homes, but they’re doing it in a more palatable way for them as well as for the market.”
Under Obama’s Home Affordable Foreclosure Alternatives program, known as HAFA, loan servicers receive as much as $2,000 for completing a short sale while borrowers who sell for a loss can get as much as $3,000 to relocate. In March, the program increased the maximum settlement for second-lien holders to $8,500 from $6,000 and removed occupancy requirements for servicers to receive government payments.
More than 39,000 short sales were completed under the program through March, according to a May 4 Treasury Department report.
JPMorgan completed 14,254 HAFA transactions, followed by Bank of America’s 10,155 and Wells Fargo & Co. (WFC) (WFC)’s 7,640 as of March 31, according to the report.
In the first quarter, pre-foreclosure sales made up 80 percent of distressed transactions in New York, followed by 67 percent in New Jersey, 60 percent in Idaho, 56 percent in Colorado and 56 percent in Florida, RealtyTrac said.
California had 34,029 pre-foreclosure sales, the most of any state, followed by 15,949 in Florida, 9,454 in Arizona, 6,126 in Georgia and 5,282 in Nevada.
Short sales increased in judicial states, such as Florida and New York, where foreclosures require court approval, as well as non-judicial states such as California and Georgia, according to Blomquist.
“There isn’t really any pattern,” he said.
To contact the reporter on this story: John Gittelsohn in Los Angeles at email@example.com