Short Sellers Locked Out - Short Sale Fundamentals
 
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22
Dec

Short Sellers Locked Out

Here’s news that sure to shake up the industry!
Here’s the break down: We’ve known all along that
the short sale is going to save the economy, the
housing market, the credit system, end hunger,
bring world peace, joy to all, etc. etc. Even the
government has been willing to admit that and
openly encourages homeowners to pursue a short
sale when loan mods don’t work. (We encourage them
even before loan mods, but let’s keep the peace.)

But apparently HUD hasn’t gotten on the band wagon.
Here’s the kicker: According to a letter sent by
HUD to lenders, borrowers behind on their mort-
gages during a short sale will not be able to get
an FHA insured mortgage for 3 years!

Apparently, short selling in their book is
classified as a "strategic default" and is not
something they’re willing to put their money
behind. According to their way of thinking, if
someone pursues a short sale to take advantage of
reduced prices or to move into a superior property
that disqualifies them from FHA assistance.

*****What’s the logic there? Help us figure it out!

And get this: the only way to be eligible for an
FHA-insured mortgage is to be current on your
mortgage payments and the proceeds of the sale must
serve as PAYMENT IN FULL!!

So apparently the government favors foreclosures
over better alternatives. I honestly don’t know if
they’re making any sense. So if anyone out there
has an opinion on the issue, I’d love to hear it.
And so would all my readers. So let me know what
you think by commenting on my blog.

Have a great day folks!

  • http://www.expertforeclosurehelper.com Tony Orlando

    Hello.

    I would like to put a link to your site on my blog roll if you want to do the same for mine. It would be a good way to build up both of our readerships.

    thank you.

  • http://ottomaddock.blogspot.com Otto Maddock

    It’s a simple matter of who they’re looking out for: and it’s not middle class homeowners. (It’s definitely not poor people, but that’s been the rule for close to 50 years now.)

    The irony is that HUD was “deputized” by LBJ for the explicit purpose of helping out exactly those constituents: the middle and lower class majority of the United States.

    You might be too young to remember this, Corey, but HUD was rocked with scandal during the 80s because it had become an amazingly corrupt organization. To this day it’s plagued by “missing money” to the tune of over $50 billion dollars! Much like the Federal Reserve, it’s an out-of-control Federal level agency with obvious ties to private & corporate power, and way too much power over the “free” market in 2009.

    My two cents, just a grumpy old numbers dealer from a dozen different industries. I’d be interested to hear what other folks have to say and I’m less convinced than I probably sound.

  • http://www.genielancaster.com Genie Lancaster

    I feel that the service companies that are managing the short sales for the banks are unwilling to work with the seller and the buyer when a contract is presented, most of the time. For some reason, I have found that the bank would rather have a foreclosure because it is easier. What do you think?

  • Margaret Amador

    It used to be where you were eligible in 18 – 24 months for a new FHA loan after a successfull short sale. 3 years doesn’t make sense since we need all the buyers that can buy.

    Now you even can purchase a new home after a successful short sale immedeately IF you are current on your payments.

    This business is evolving and rules are prone to change. Let’s just hope the lenders are able to adapt quickly.

  • Dan

    This makes no sense unless I’m reading it incorrectly – to GET a short sale, you typically have to be behind (by 3 mos?) Then, is HUD saying that you can’t get a mortgage if you were behind AT ALL, or after that original default? This might mean that no one who got a short sale as a seller can get a mortgage for 3 years since they were behind, a requirement for short sale in the 1st place?

  • AD

    Can you or anyone out there give a reading on Joint Venture funding. Will this cure 30-60-90 day seasoning problem that FHA and some banks have instituted? Also is Bank of America and Countrywide the only lending institutions have the requirement for or blocks short sales?
    AD

  • Lee

    What!!!! You mean banks will allow you to sell a home for less than what you owe!!! That’s crazy, why would they ever even offer such a deal. I have been in real estate for about two years now. And unfortunately have not been able to close any short sales because these money hungry incompetent lenders take too long to approve a short sale. By the time they get to the file the buyer has walked away in disgust. The system is not working fast enough, the lenders seem to be waiting for another Obama rich man bail-out…

  • http://www.darfler.com Mark Darfler

    What’s the big deal with a 3 year moratorium on buying another home. It’s not like we’ll see a major turn around in housing by then. HUD is actually helping the troubled homeowner by keeping them out. If the moratorium was more than 5 years, I think there would reason for concern. 3 years is very fair.

  • Joseph H

    I guess HUD is still in the dark ages and need some new life. Have they looked into short sales? Do they have a preconceived thought on short sales? The bottom line is that all option should be explored, in order to get out of this crisis.

  • Kelly Harper

    I don’t think it’s the smartest idea to keep borrowers who are behind on their mortgages during a short sale from being able to get an FHA-insured mortgage for 3 years. If the short sale is successful, that same person may potentially
    want to and be able to buy another home within that 3-year period. If that buyer can’t get an FHA-insured mortgage, then he/she may not be able to purchase another home. There have been a lot of short sales that have already occurred by borrowers who were behind on their mortgages, and there will be more.
    Many potential home buyers would essentially be locked out of the housing market for the next 3 years, and the overall housing market could suffer as a result.

    Kelly H., Virginia



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