Deb Espinoza's Real Estate BLOG: New Program to Pay Homeowners to Short Sale Misses the Mark... again.

I'm just reading an article by the New York Times about a government program to "Pay Homeowners to Sell at a Loss" if they 'haven't been rescued" by a loan modification. Are you kidding me? Does this reporter actually think that the benefit of this program is to pay the homeowner to do a short sale rather than being foreclosed on. What homeowner in their right mind wouldn't rather have a short sale on their record rather than a foreclosure and possible bankruptcy? DUH.

Listen here and listen well. It is not due to lack of homeowner willingness or cooperation that short sales are not being completed. Its the BIG STUPID banks and investors that bought those notes, and also the new creditors that have purchased these non-performing second and third liens. Most of these lenders have overworked, underpaid, and undertrained 'loss mitigators' handling these files; 100's of them per person. Their requirements are all different, their terms are all different, catch your negotiator on a bad day and you're screwed... your file disappears and you get to start all over! Some of these people get on their little power trips knowing that they have your homeowner's future in their hands; they demand more money without knowledge of values, they try to get payment 'under the table' off the closing statement because it probably gives them a bonus or something. Hello! This is illegal!, but we agents are in a quandry because we soo want to help our clients.

Why is it okay for these behemoth banks and investment companies to "strategically default' on their obligations but they'll be damned if they are going to let a homeowner who got caught in a housing frenzy that Freddie, Fannie, banks, investors, Acorn, Barney Frank and the great US Government et. al. who decided years back that "everyone in America should own a home", do it ?? Homeownership is NOT a right and not everyone has the income or discipline to be a homeowner. Yes, there are actually responsibilities that you should take on when you become a homeowner; not all are willing or able to do this. There really is a large section of the population that are meant to be renters; just as there are business owners and employees.

So, back to the article (you can tell this really flames me out eh?); A former executive at Fannie Mae; Thomas Lawler, stated that "short sales are taylor made for fraud", because in his words " If I lend someone $200K to buy a house and he tells me he has someone to buy it for $150,000 or else I am going to default. Do I really believe the borrower can't pay it back? and is $150,000 a reasonable offer for the property?" REALLY? Do you really not know how far housing prices have dropped since the bubble? and why are homeowners not allowed to use their brain and work a 'strategic default'? (Granted most homeowners are busted, broke, and disgusted- in an effort to try and keep their dream and do the right thing they have spent every stinking penney they had and some, even borrowed from family and their futures with 401K and IRA money) And why don't you tell me how Fannie Mae and Freddie Mac as companies run by the US Government are not neck deep in fraud in the practices that they have used not only help these homeowners get into this mess in the first place, but also in telling their stock holders that 'we are financially sound and there is nothing to worry about". HA HA HA

Its time the government gives the homeowners a break. The homeowner, NOT the bank or the investor. The only two good things I see in this program (set to start April 5, 2010) are the $1500 relocation fee that the homeowner gets at completion of the short sale and JACKPOT the fact that as part of the transaction They will get the lender's assurance that they will not be later sued for the unpaid mortgage balance. Hallelujah! You FINALLY made a brilliant decision!! Now lets do some more:

1. 1. As long as there is a buyer willing to pay fair market value for the property MAKE the lenders take the short sale offer! All of 'em..
2. As long as the homeowner hasn't taken mega bucks out on the property for toys and vacations, NO deficiency judgements allowed!
3. REFUSE to let these second mortgage holders (CHASE BANK), sell their second mortgages to collection agencies. It makes it close to impossible to complete a short sale because they won't release the lien for a standard $3K; and guess what? Chase, you made your bed now LIE IN IT!
4. Make all lenders that sell mortgages to Freddie and Fannie, FHA and Ginnie; Follow PROTOCAL on short sale process or FORGET ABOUT SELLING ANY MORE OF YOUR LOANS TO THEM! and maybe pay a penalty. Make the system smart; I know everyone has heard of KISS. Agent submits an offer and a comprehensive, professional valuation of the property. Homeowner supplies a hardship letter explaining their circumstances- Lost my job, moving need to sell, house isn't worth what I paid in the hey day and I don't want to spend the next 15 years of my life to get back to where I started because it MAKES GOOD SENSE and you would do it! These are all good reasons to short sale and don't try and tell me otherwise.
5. Make the lenders take the offer as settlement in full, no deficiency; 1099-C provided upon close of sale.  And yes, keep in that relocation amount of $1500; at least it means something to a person. Do you really think that giving a first or second mortgage an extra $1000 is going to sway them to allow the short sale? NOT... NO, it isn't and it doesn't. They already got enough of our damn money in your stupid bailout.

The sooner we do something like this, the sooner we flush out the mess and get back to normal. Stop making your programs all mamby-pamby and focused on these lenders. Focus on who you are 'pretending' to care to help, the ones who really need it; the homeowner, the families, the Americans who pay their taxes and pay your salaries!