Written By: Gail Foster
The Housing Sales numbers for July are out and the stock market lost 134 points today because they were miserable. The lowest monthly home sales since 1999. We aren’t moving forward, we are moving backwards. It is time for some creative thinking so that we can begin to put the housing market on firm footing. We need to preserve property values and entice strong borrowers to invest in their future with home ownership. We need to begin to clear the inventory and return the market to a less volatile ebb and flow. The beginning is lender education programs, community outreach meetings about new lending guidelines to encourage applications, mass marketing of specialty programs available and an industry wide push to make the lending process more user friendly.
These ideas are just the beginning. There’s more that can be done. The housing market is full of short sales. They are generally difficult transactions, full of frustration with no guarantee that they will get to the settlement table. All the delay in negotiating and processing short sales has to cost someone something, it is a non performing loan, interest is accruing, money is being lost, month after month after month. Homeowners go through months of anguish and buyers avoid them because of the difficulty and uncertainty of success. Surely there must be an easier, more cost effective way of addressing short sales. The process of foreclosure is costly and time consuming also. I can’t imagine a lender actually recoups much of what is lost in loan deficit and the cost of foreclosing. How can this be a template for success, a process that makes money, strengthens lenders and increases liquidity of funds? It isn’t!
Why not bring the lender into the short sale at the very beginning. In my opinion, the goal is to turn a non performing loan into a performing loan as quickly as possible. Loan modifications have had very limited success. Statistics show a good amount of borrowers who have their loans modified end up in arrears again. We need a different approach, a paradigm shift of thinking. We need solutions that put loans back into the black and entice buyers to acquire these properties.
So we have a borrower in arrears and they have contacted a Realtor about a short sale. At this point, the Realtor and the Lender should become quick friends, partners in the successful sale of this property and the creation of a performing loan for the lender. The property should be appraised immediately and assessed for FHA issues. Once done, the property is put on the market not as a short sale but as a home with special financing in place. The loan could include monies toward closing or small escrows for repairs needed for FHA requirement, a special interest rate or value discounts. The marketing can include borrower qualifications and the whole transaction becomes much easier. The original investor can retain the paper and a loss turns into a profit. Sort of a modified loan modification but with a new borrower. A program such as this could make distressed properties more attractive to buyers, minimize loss to lenders and would help to clear inventory.
It is time to think outside of the box. We need to be creating solutions that are win-win for everybody. It is critical for the real estate and lending industries to find answers that create business. We have certainly become proficient at stagnating business. July’s housing numbers show that clearly. It is time to move in a new direction, create a new business plan that creates new business, builds consumer confidence and brings stability to the housing market. A business that isn’t creating business is soon out of business.
About The Author
Gail Foster - As an active real estate industry professional for the past twelve years, Gail Foster is a proud licensed mortgage officer and a Realtor in the state of Maryland. If you would like to become a writer for NAMU®, please email us at: contact@mortgageprocessor.org.
