Reasons Why Short Sales Closings Will Continue To Go Up In 2010

In 2009, there were 13,000
short sales closings in Greater Phoenix.

In 2010, I estimate there will be between
18,000 to 20,000 short sale closings.

This paper briefly touches on why there will
be more short sale closings in 2010 and has statistics on short sale closings in 2009.

• Many homes are underwater. The market value of these homes is less than what is owed. The
median home value in December 2009 has declined 53% from its peak in June 2006. The median
home value in December 2009 was $126,500. The last time it was lower was February 2001 at
$124,900.

• In 2010, home values may go up slightly in some areas, they will be flat in most areas, and may
decline in other areas.

• The economy and unemployment.

• Adjustable rate mortgage resetting at higher interest rates.

• The lender usually gets more per square foot for a short sale over a lender owned sale (as seen in
Table 2 below).

• The Time Value of Money: If the lender believes a property is in a declining market, they are
more likely to consider a short sale since will probably get more money today through a short sale
than tomorrow through a lender-owned sale.

• Sellers are encouraged to complete a Short Sale before December 31, 2012, which is the last day
of the Mortgage Forgiveness Debt Relief Act and Debt Cancellation.

• The Federal Government is encouraging shorts sales through their Home Affordable Foreclosure
Alternatives Program (HAFA.) The program does not take effect until April 5, 2010, but servicers
may implement it before then if they meet certain requirements. The program sunsets on
December 31, 2012.

• HAFA is intended to speed up short sale process. Some criteria of the program are:
o The property is the borrower’s principal residence.
o The mortgage loan is a first lien mortgage originated on or before January 1, 2009.
o The mortgage is delinquent or default is reasonably foreseeable.
o The current unpaid balance is equal to or less than $729,740 (the maximum unpaid balance
limit may be $417,000 in Maricopa County. This has not yet been clarified).
o The borrower’s total monthly mortgage payment exceeds 31 percent of the borrower’s gross
income.
o Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for
servicers to cover administrative and processing costs; and up to $1,000 for investors for
allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien
holders.
o The lender has to agree to release the seller from the liability of the underlying debt. Posted by Brian on 04:43 AM • (0) Comments • Permalink