Short Sale Blog

RealtyTrac, an online aggregator of foreclosure information, just released it's mid-year foreclosure report. While the most recent 6-month time period shows a 5% decrease from the last half of 2009 - compared to the same time-period last year, foreclosure filings are up by 8%.

Nationwide, one in 78 properties received a foreclosure filing in the first half of 2010. It is expected that by year end, a over 3 million properties will have received a foreclosure notice in the United States.

In the month of June 2010, in King County, there were 1,615 properties that received a foreclosure filing. That is a rate of one in every 517 properties received a foreclosure notice. Specific areas that were hit hard in June include Fall City with a rate of one in every 184 properties, and Maple Valley with one in every 211 properties receiving a foreclosure notice.

Overall, the trend is not positive in King County and the Seattle area. It is actually frighteningly bad. I'm not sure people realize the crisis our local population is currently going through. The amount of dislocation and upset in thousands of our neighbor's lives is very real, and is increasing rapidly.

• February - 561
• March - 832
• April - 1,282
• May - 1,502
• June - 1,615

Our mission here at Seattle Short Sales, Inc. is to help as many homeowners as possible through this difficult period of time. If you are a homeowner, please contact us today for assistance. There is a never a charge to a homeowner for our service. You will always have an attorney available to you at no charge for both initial consultation and lender negotiations.

For almost three years, the jumbo mortgage market has been nearly frozen. But the banks have recently decided it is time to re-start lending to the high-end market, and homeowners are beginning to find relief.

A jumbo mortgage is a loan of more than $729,750, not backed government-sponsored enterprises such as Fannie Mae or Freddie Mac. Last year at this time, the average rate was 6.86%. Today, it is 5.48, a rate that homeowners haven't seen since 2003.

In this foreclosure crisis of the Great Recession, the first homeowners hit were the ones with adjustable rate mortgages in lowered priced properties. When the mortgage reset, or the homeowner lost their job, there wasn't any safety cushion, and the properties were quickly taken back by the banks.

The next wave of defaults were on higher-priced properties. In general, homeowners in higher-end properties had more financial cushion to ride out the downturn. However, due to easy qualifying terms in previous years, many homeowners with jumbo loans realized they they had purchased more house than was necessary.

The problem over the last three years was that if the owner of a higher-end property wanted to sell, whether they had equity or not, they had trouble finding buyers who could get a loan. This lack of buyer financing created pressure on high-end house prices, further exacerbating problems for high-end homeowners.

High-end properties increasingly became situations where the homeowner owed more on their loans that the property could be sold for. In this case a short sale was necessary. Short sales can be difficult in themselves. Faced with a high-end short sale property, with a lack of buyer financing, it became an ever more dire situation.

The new lower rates are going to be a tremendous relief to the high-end market. More-affordable jumbo loans will not only allow some homeowners to re-finance into a more affordable loan product, but allow more buyers to move into higher end properties.

To validate this trend, Citibank announced that applications for jumbo mortgages were up 30% over the last 60 days. Vijay Lala of Bank America stated that they are now offering competitive rates in the jumbo market, stating, "We are very active in that marketplace, and we believe that jumbo loans will help lead the recovery in housing."

Seattle Short Sales, Inc. is a specialist in the marketing and short selling of high-end properties in the Seattle area. Please contact us today and we would be glad to answer all of your short sale questions.

Roughly 16% of mortgages on the LendingTree network in Washington are worth less than what is owed on the loan.

LendingTree is an online exchange for mortgages. According to LendingTree, Washington came in slightly below the average negative equity national average of 18.1%. The state with the lowest percentage was Oklahoma with 6%. Nevada topped the chart at 69.9%.

Government default studies have shown a direct correlation between rates of negative equity and default rates. Homeowners who owe substantially more than their home is worth are much more likely to default on their loan, or walk away from their mortgage.

If you are a homeowner looking for answers regarding your negative equity situation, please contact Seattle Short Sales, Inc. today for help understanding your options.

One of the positive developments in the short sale industry in the last year was the rollout by Equator of an online short sale management system. Currently, Bank of America and GMAC are the primary users of the system. Previously, getting a short sale approved by Bank of America could easily take 6-12 months. They were simply deluged by paperwork from hundreds of thousands of borrowers and couldn't keep up.

The Equator system is a web-based file management system with built-in case tracking. Overall, we are very pleased with the system. If you go to our short sale approvals page, you can see how long it is now taking to get approval letters. In particular, look for ones titled BAC Home Loans. Those are approved short sale approval letters that Bank of America issued via the Equator system

We are glad to see that Equator is unveiling a software platform for smaller firms. We expect that this development will only help homeowners who are looking to sell their home and avoid foreclosure. If you are a homeowner in Washington State and would like assistance selling your home via a short sale, please contact Seattle Short Sales, Inc. today.

Today, Lender Processing Services (LPS) issued their latest report on foreclosure and short sale statistics, across both the United States, and here in Washington State. Overall, the trends are not positive. The total percentage of borrowers in the United States that are delinquent (excluding Foreclosures) is at 9.2%. This is a year-over-year increase of 7.9%. Foreclosure inventories increased by 13.5% during the same period.

The one bright spot is that completed short sales are on the rise. The increase in the last quarter was 9.2%. Over the last year, the number of completed short sales rose from 18,619 to 41,030 - an increase of 120%.

In Washington State, the number of non-current borrowers has stayed roughly the same in the last year, at 8.7% (excluding foreclosures). In regards to short sales, here at Seattle Short Sales, Inc. we have seen a tremendous increase in homeowner awareness concerning short sales. Many homeowners have taken the time to educate themselves on the benefits of a short sale on their credit score and future borrowing capabilities.

If you are a homeowner, please contact us today for assistance.

Freddie Mac CEO, Ed Haldeman released a statement today on "Why Foreclosure Prevention is a National Priority." He states that while the overwhelming majority of borrowers are current on their mortgages, that since the start of the recession that over three million homeowners have lost their homes to foreclosure, and that over five million are still currently at risk.

While Freddie Mac would like to find ways to help homeowners stay in their homes, they recognize that in many cases it is not financially feasible to make that happen. The typical reasons why a homeowner doesn't qualify for a workout plan is when they are struggling with a job loss, curtailment of income, a health issue, or simply bought more house than they can afford.

In those situations, Freddie Mac has found that the best scenario for the homeowner is to find a graceful exit from homeownership. Solutions such as short sales are recommended by Freddie Mac as they help homeowners avoid the stigma of foreclosure, shorten the waiting period before they can buy another home, and may inflict less damage on the individual's credit report. Freddie Mac reports that short sales are up by 600% from 2008.

Fannie Mae, in an effort to reduce the amount of 'strategic defaults' has issued new underwriting guidelines meant to punish those homeowners who walk away from a mortgage, even when they have the ability to pay it.

Researchers have stated that the main motivation to walk away from a mortgage is when there is negative equity. According to real estate research firm CoreLogic, about 11.3 million homeowners are underwater on their mortgages. Around 2.3 million additional homeowners are very close to being underwater. All told, almost one-third of all U.S. homeowners are either underwater or are close to it. CoreLogic projects that the typical underwater homeowner will not return to a position of positive equity until 2015 or 2016 at the earliest.

Fannie Mae is targeting homeowners who let their house go to foreclosure without evidence of a hardship or a good-faith attempt at a workout alternative. The penalty that Fannie Mae is implementing is two-fold. First, they have declared that strategic defaulters will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Secondly, they are vowing to aggressively pursue deficiencies in states that allow them to do so.

In order to encourage workouts, Fannie Mae, in April 2010, issued a revised underwriting bulletin, found here, that encourages homeowners to seek foreclosure alternatives such as short sales, by making the homeowner eligible for a new Fannie Mae backed loan in as little as two years. Compared to the waiting period of seven years post-foreclosure, it is clearly an advantage to pursue alternatives to foreclosure.

Let's take an example of a borrower who is underwater. Here at Seattle Short Sales, Inc. we work with hundreds of local homeowners, and can draw on a mountain of recent statistics. You can see all of the short sale approval letters here. On average, when the home is sold, the debt discounted is over $100,000 on an average property.

In our example, the homeowner previously purchased the property for $350,000 four years ago. The homeowner has a mortgage payment that is over $1,000 more than a rental payment would be for a suitable, alternative dwelling. If it takes until 2016 to regain their lost equity, that would mean they are making 84 housing payments for a $1,000 more than necessary, with nothing to show for it in the end. $84,000 put into the pocket of a homeowner in only six years is the reason why people voluntarily default.

Now, in Washington State, if the house goes to a Trustee Sale, the foreclosing senior lien holder, in most cases will not have a right to pursue the borrower for a deficiency. The junior non-foreclosing lien holder does retain the right. So, if the homeowner only has one mortgage, then there is a good chance that they could completely walk away unscathed, except for the restriction in using Fannie Mae money for the next seven years. If they have a junior lien, then the situation is more complicated.

In all cases, the homeowner will want to consult with a real estate and bankruptcy attorney to assess their options and compare the pros and cons of the situation.

In the month of April, 2010 - Seattle Short Sales, Inc. received 22 short sale approval letters. The total discounted debt totaled $2,244,000. Since Feb 15, 2010 - Seattle Short Sales, Inc. has received 56 short sale approval letters.

Of the 22 short sale approval letters received in April, 15 banks were represented. BAC Home Loans (Bank of America's servicing arm) and Wells Fargo each had three, while Chase, CMS Carrington and Indymac had two each.

The fastest company was Specialized Portfolio Servicing, generating an approval letter in only 15 days. Hot on their heels was HSBC at 16 days. The majority fell in the 30-90 day range, measured from the day we submitted the file to receiving the approval letter.

The longest was Bank of America Home Loans with an approval letter that took 290 days, with Chase, not far behind at 221 days. These two weren't surprising. The Bank of America loan was a former Countrwide Loan, and the Chase loan was a former WAMU/Long Beach loan. Historically, those two loan portfolios have taken the longest to negotiate.

If you are a homeowner, and have any questions about short sales, and how to get started, please fill out this form.

Best,

Ross Kilburn

There has been some confusion regarding when mutual acceptance is, in regards to qualifying for the tax credit.

The WA Association of Realtors Legal Assistance Hotline has issued their opinion that mutual acceptance is when buyer and seller have reached agreement. The approval from the lien holder is simply one contingency in the agreement.

Form 22SS discusses mutual acceptance, but it is only in regards to the "computation of time" and does not apply to this situation.

In conclusion, you do not need the lien holder's approval by April 30, 2010 in order to get the tax credit.

Let's get those offers in!

Please let me know if you have any questions.

To your success,

Ross Kilburn
Seattle Short Sales, Inc.
800-603-3525 (office)
888-860-1314 (fax)

In Washington State, by the last day of February 2010, 9.1% of loans were delinquent. This figure was provided by a new report issued by Lender Processing Services. LPS states that of those delinquent loans, 7.8% were already in default and starting the foreclosure process.

Nationally, the total non-current loan figure, including both delinquencies and foreclosures is at 13.5%. This includes 1.1 million loans that were current at the beginning of January and became delinquent or entered foreclosure as of February month end.

In February, nationwide, 4.56% of loans rolled into 'worse' status vs 2.22% that improved. Total delinquencies nationwide increased 21.3% since February 2009.

These numbers are staggering. The one bright spot is that HAMP loan modifications seem to be picking up speed. In addition, the new HAFA (Home Affordable Foreclosure Alternatives) is just starting to roll out, and should help homeowners pursuing short sales.

Seattle Short Sales, Inc. has seen a dramatic increase in homeowners pursuing short sales in the Seattle area. For help with your situation, please contact us today.