August 22, 2012 – Under new guidelines from federal housing regulator and mortgage finance agencies Fannie Mae and Freddie Mac, the Federal Houston Finance Agency has announced steps to make “short sales” of “underwater” homes easier to sell, and thus easier to buy.
The steps include extending help to people who have financial difficulties but haven’t missed mortgage payments.
I’m writing about this here because rarely does a month go by that a client or friend asks me to share any ‘good deals’ through short sales.
The holdup with most short sales currently is that the holders of both the main mortgage and secondary liens, e.g. home equity lines of credit, must sign off on the deal because they are accepting less than the outstanding balances.
Virtually everyone, including yours truly, agree this process is overly complex. I’d like to think there is a better way to deal with these while netting benefits to the economy, the housing market and lender balance sheets.
According to reports in The Wall Street Journal and other media outlets, one part of the plan is for Fannie Mae and Freddie Mac to place a $6,000 cap on the amount of money mortgage holders can receive when the sale is completed.
Because second-lien holders still would be able to reject the sales if they see fit, it’s unclear how this and other provisions of the new plan will work, if at all. They are set to go into effect November 1, 2012.
At least one publisher in the mortgage industry, Guy Cecala of Inside Mortgage Finance, opined that $6,000 “isn’t a lot to offer.” No kidding.
So, don’t get your hopes up too far.
According to the Journal, about 80% of homeowners that are underwater with loans backed by Fannie or Freddie are not missing their mortgage payments.
The biggest holders of second liens in the U.S. reportedly are Bank of America, Wells Fargo, J.P. Morgan Chase and Citigroup.