As strange as it sounds, most REO shouldn’t be listed for sale. REOs being processed for sale — the REO pipeline — is all banks are supposed to have. Once they finish processing, they are supposed to put them for sale and liquidate. It’s not unusual for a high percentage of REOs to be held by the banks. What is more telling about their policies is how long it takes them to sell a property, and how they classify the properties they hold. If all their properties are undergoing preparations for sale, and if sales are happening quickly, there is no problem. However, if it takes them a very long time to process, and if many properties are being held for no particular reason, then it becomes obvious lenders are withholding inventory for other purposes.
Why Lenders Don’t List REOs: Procedural and Practical Impediments
July 27, 2012 — By Daren Blomquist, RealtyTrac Vice President
A recent AOL Real Estate blog post on bank-owned homes being held off the market raised a few eyebrows, even among those who acknowledge a so-called shadow inventory.
Citing data from RealtyTrac and CoreLogic, the article claimed that as many as 90 percent of all bank-owned homes are not listed for sale. That 90 percent number comes from CoreLogic. The RealtyTrac estimate is 85 percent of REOs are not listed for sale. …
Again, this is not unusual. If a higher percentage of REO were listed for sale, it would be a sign that lenders are asking too much and not selling them quickly enough.
So if there is strong demand for these properties in many markets, why are banks, lenders and other entities holding these properties not listing them for sale?
One of the reasons is that procedural and practical impediments prevent banks from listing their foreclosed homes for sale. RealtyTrac data shows that on average it takes more than six months, 195 days to be exact, from the time a bank repossess a property to when it sells that property. It’s not that the properties are never sold, but in many cases it simply takes time for the properties to be ready to sell.
Is 195 days a long time? It depends. Comparing how long it takes flippers to renovate and liquidate, provides a good indication of how motivated banks are. Flippers make money by turning properties over quickly. If banks felt they had a better use for the capital than leaving it in a non-performing asset, they would process REOs as quickly as flippers do. So how big is the difference?
It takes flippers 138 days on average to turn a house around in California. It takes banks 283 days. That’s more than double the processing time.
If a bank reports they have a high percentage of their properties in the renovation pipeline, that is a ruse to disguise the fact they are dragging their feet on processing. It should take less than 45 days for banks to prepare a house for sale. Lenders should be turning these around faster than flippers do because lenders always take back the easiest properties at auction. If a property is really run down or requires special handling, they will lower their opening bid and let a third party buy it at auction. So even cherry-picking the easiest properties, it still takes them twice as long. That is disguising the inventory they don’t want to sell.
22 Percent of Fannie Mae REOs Listed for Sale
The procedural and practical impediments involved here are outlined nicely in the most recent quarterly 10-Q SEC filing from Fannie Mae, which acknowledges that as of the end of the first quarter of 2012 only 22 percent of the foreclosed properties it owns were available for sale.
An additional 20 percent had an offer accepted but were not yet sold, while a whopping 48 percent were listed in the category of “unable to market” for the following reasons:
1. Redemption status: 13 percent. These are properties where the homeowner or second lien holders still have the opportunity to redeem the property after it is foreclosed. Not all states have a redemption period, but a handful of states allow for a redemption period, ranging from a few months to a year.
2. Occupied status: 14 percent. These properties are still occupied and the eviction process is not yet complete.
3. Rental property: 8 percent. These are properties with a tenant living in the home under Fannie Mae’s “Tenant in Place” or “Deed for Lease” programs. Under the Helping Families Save Their Homes Act of 2009, all lenders who foreclose are required to honor the terms of the previous lease and if there is no lease in place to give current tenants who were renting the home at least 90 days before eviction.
4. Properties being repaired: 5 percent. Foreclosed homes can often be in bad shape, even vandalized by the former owners or others in some cases.
That is a very low number. The major banks will have a much higher percentage in this category, otherwise it wouldn’t take so long to process them.
5. Other: 5 percent
This is the category for those intentionally being withheld from the market. For the GSEs, this is also a very small number. No big withholding here.
Why Lenders Don’t List REOs: The Conspiracy Theories
August 8, 2012 — By Daren Blomquist, RealtyTrac Vice President
… While these practical impediments to listing REOs are more concrete and easier to grasp, two items in the most recent quarterly 10-Q SEC filing from Fannie Mae opens the possibility that lenders may be intentionally holding back REO inventory from being listed.
The first item is found in the list of reasons that Fannie gives for only 22 percent of its REO inventory being listed for sale: Other, accounting for 5 percent of the total 78 percent that are not listed.
The second is some version of the following phrase found several places in the report in reference to one of the strategies Fannie is taking to boost its bottom line: “Managing our REO inventory to minimize costs and maximize sales proceeds.”
At least they are openly admitting what they are doing. Apparently, despite the anti-trust violations, everyone is okay with the GSEs saving taxpayer’s money at the expense of future buyers. I am torn. I applauded DeMarco when he didn’t forgive principal to give loanowners money from taxpayer coffers. That’s different though because those people already made their decisions. Hurting those trying to get into the housing market is not so noble, but I guess you take the bad with the good.
This leads the door open to Fannie Mae and other lenders intentionally holding REO homes off the market if it somehow benefits them. And why might it benefit them? There are at least two reasons:
1.Deferring reported losses: lenders don’t realize the losses on a distressed loan — at least from an accounting perspective — until they sell the property at whatever price the market will bear. Thanks to changes to the so-called mark to market accounting rules back in early 2009 to try to stop the bleeding in the financial industry as the result of plummeting home prices and a flood of foreclosures. Up until the sale of that foreclosed home, banks may be able to justify a higher valuation of the asset because of the relaxed mark to market rules, but once that sale occurs there is no denying the full extent of the loss.
Many housing market observers have been pointing out this injustice for years. Without this arcane accounting rule, shadow inventory would not be possible, and lenders would have completed their liquidations a couple of years ago. Of course, prices would be at Las Vegas levels across the country, and our banking system would be bankrupt… I think there’s supposed to be a downside in there somewhere.
2. Preventing fire sales: Foreclosed homes, or REOs, sold for an average price that was 33 percent below the average price of a non-foreclosed home in the first quarter of 2012. These distressed sales have an impact on the values of surrounding homes and the future sales prices of surrounding homes as the distressed sales are used by appraisers and buyers in evaluating comparable sales. A market oversaturated with distressed homes for sale can turn into a feeding frenzy for buyers — especially if there are very few buyers looking to purchase. The basic law of supply and demand dictates that too much supply of these properties and low demand will result in plummeting prices. So to protect the prices of future REOs that they plan to sell, banks may be motivated to limit the supply of those REOs available at any given time — at least creating the perception that there is a limited supply and thereby tipping the balances back in favor of sellers rather than buyers.
The withholding of inventory to drive up prices is exactly what we are witnessing right now. Lenders simply stopped foreclosing on delinquent mortgage squatters in the Southwest in February of 2012. They did it primarily to comply with the attorneys general settlement agreement, but they have also been enjoying the side benefit of rising prices, so they have been in no hurry to speed up their foreclosure processing. Amend-extend-pretend is finally paying off.
This is the stuff conspiracy theorists latch on to, always looking for an opportunity to portray the big banks as malevolent masters of the housing market. … There are some rational reasons why banks would want to intentionally restrict the supply of bank-owned properties available for sale.
The big banks are malevolent masters of the housing market. It is a portrayal they earn with their reprehensible behavior. The people being foreclosed on hate them for taking their homes. The people waiting for these homes to be vacated hate them for not doing it fast enough. And everyone who has to pay the bills for their bailouts — which is everyone — hates them for taking their tax dollars to clean up a mess created by runaway greed and a complete abdication of responsibility for sound lending.
$1,000,000+ HELOC booty and three years squatting
The people who bought high end homes in the 90s really got a great ride, didn’t they? They were given unbelievable amounts of HELOC money, and when the Ponzi scheme imploded, rather than being foreclosed on, they were given years of free housing to help them out. If not for the terrible loss of entitlement, it would be too good to be true.
- Today’s featured property was purchased for 7/12/1999 for $710,000. The owner used a $568,000 first mortgage and a $142,000 down payment.
- On 10/25/2004 he refinanced with a $995,000 first mortgage. Apparently, he needed $400,000 for something.
- On 6/1/2006 he obtained a $125,000 HELOC.
- On 9/5/2006 he refinanced with a $1,397,500 Option ARM.
- On 12/8/2006 he opened a $250,000 HELOC.
- Total mortgage debt was $1,647,500 plus negative amortization assuming he maxed out the HELOC.
- Total mortgage equity withdrawal was $1,079,500.
- He was served a notice of default on 3/23/2009 which means he quit paying sometime in 2008. The bank didn’t take the property back until 10/21/2011 allowing this owner to squat for three years.
Does it really take nine months to prepare a house for sale? I imagine this was listed on their books as a renovation in progress. Either they have the worst renovation crews on the planet, or they are in no hurry to process these properties. I suspect it’s the latter.
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Proprietary OC Housing News home purchase analysis
27743 HIDDEN TRAIL Rd Laguna Hills, CA 92653
$845,000 …….. Asking Price
$710,000 ………. Purchase Price
7/12/1999 ………. Purchase Date
$135,000 ………. Gross Gain (Loss)
($56,800) ………… Commissions and Costs at 8%
============================================
$78,200 ………. Net Gain (Loss)
============================================
19.0% ………. Gross Percent Change
11.0% ………. Net Percent Change
1.3% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$845,000 …….. Asking Price
$169,000 ………… 20% Down Conventional
3.64% …………. Mortgage Interest Rate
30 ……………… Number of Years
$676,000 …….. Mortgage
$159,724 ………. Income Requirement
$3,089 ………… Monthly Mortgage Payment
$732 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$211 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$94 ………… Homeowners Association Fees
============================================
$4,126 ………. Monthly Cash Outlays
($696) ………. Tax Savings
($1,038) ………. Equity Hidden in Payment
$201 ………….. Lost Income to Down Payment
$126 ………….. Maintenance and Replacement Reserves
============================================
$2,719 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$9,950 ………… Furnishing and Move In at 1% + $1,500
$9,950 ………… Closing Costs at 1% + $1,500
$6,760 ………… Interest Points
$169,000 ………… Down Payment
============================================
$195,660 ………. Total Cash Costs
$41,600 ………. Emergency Cash Reserves
============================================
$237,260 ………. Total Savings Needed
The property above is available for sale on the MLS.
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Nearby Foreclosures
Gain a competitive advantage over other buyers. By locating distressed properties -- before they hit the MLS -- you can discover where tomorrow's REOs and short sales will appear. Most of these properties are not listed on the MLS, but they will be soon. Research properties in advance and get a jump on your competition. Don't miss out on another deal because you couldn't act quickly. Use this tool to your advantage! The red properties are already bank owned. As soon as REO asset managers prepare them for sale, they will be on the MLS. Get ready! The green and blue properties have owners who are not paying their mortgages. They may be offered as short sales, or they may go through foreclosure and become REO. Either way, they will also likely be available on the MLS soon. Find your next home! Be prepared to offer on these properties by researching them in advance or risk losing out to buyers who are have done their homework. Start your research today! To find distressed properties, enter your desired location and press search. Scroll through list by pressing "next."  |
$1,299,000 27773 HIDDEN TRAIL Rd |
0.16 miles 5 bd / 4.5 ba 3,990 Sq. Ft. |
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$1,495,000 27766 GREENFIELD Dr |
0.23 miles 5 bd / 4.5 ba 4,500 Sq. Ft. |
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$859,900 27802 MANOR HILL Rd |
0.47 miles 5 bd / 3 ba 3,000 Sq. Ft. |
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$1,429,900 27602 DAISYFIELD Dr |
0.55 miles 5 bd / 5 ba 3,600 Sq. Ft. |
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$999,900 27785 HOMESTEAD Rd |
0.6 miles 5 bd / 4 ba 3,128 Sq. Ft. |
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$779,900 27779 HOMESTEAD Rd |
0.61 miles 4 bd / 2.75 ba 3,286 Sq. Ft. |
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$1,364,000 27693 MANOR HILL Rd |
0.64 miles 5 bd / 5.5 ba 4,032 Sq. Ft. |
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$1,195,000 27131 LOST COLT Dr |
0.77 miles 4 bd / 3.25 ba 3,100 Sq. Ft. |
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$1,095,000 25672 RAINTREE Rd |
0.82 miles 5 bd / 4 ba 3,823 Sq. Ft. |
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$2,295,000 25402 SPOTTED PONY Ln |
0.86 miles 4 bd / 3.75 ba 4,700 Sq. Ft. |
18 Responses to “GSEs admit to “Managing our REO inventory to minimize costs and maximize sales proceeds””
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Since the long-standing price-discovery mechanism is now completely broken, what do you do when a market has become increasingly: speculative, manipulated, fraudulent, rigged, volatile, controlled by incompetent bureaucrats and the fed printing $trillions per annum just to keep the debt-load serviceable? You cut the cord. Meantime, malinvestment continues to pile-up in OC.
This change is being sold to us as a wind down, but it is not a liquidation.
Treasury Announces Plans to Wind Down Fannie Mae, Freddie Mac
Treasury announced Friday a set of modifications to Preferred Stock Purchase Agreements (PSPAs) between itself and FHFA designed to help speed up the wind down of Fannie Mae and Freddie Mac.
In addition to reducing the GSEs’ mortgage portfolios in a more timely manner, these modifications are designed to ensure that each firm’s earnings benefit taxpayers and help reform the housing finance market.
The modifications include a few key components, such as an annual plan to reduce taxpayer exposure to mortgage credit risk and a full income sweep of all of the GSEs’ future earnings to benefit taxpayers for their investment, replacing the 10 percent dividend payments made to Treasury on its preferred stock investment with a quarterly sweep of all profits each firm earns going forward.
In addition, the agreements require an accelerated reduction of Fannie Mae and Freddie Mac’s investment portfolios. The GSEs’ investment portfolios must be reduced to the $250 billion target set in previous agreements four years earlier than previously scheduled.
The modified PSPAs are consistent with FHFA’s strategic plan for the conservatorship of Fannie Mae and Freddie Mac released in February.
“With today’s announcement, we are taking the next step toward responsibly winding down Fannie Mae and Freddie Mac while continuing to support the necessary process of repair and recovery in the housing market,” said Michael Stegman, counselor to the secretary of the Treasury for housing finance policy.
Treasury said it hopes to use these modifications to prevent the market from returning to its previous form and to end the “circular practice of the Treasury advancing funds to the GSEs simply to pay dividends back to Treasury.”
“As we continue to work toward bi-partisan housing finance reform, we are committed to putting in place measures right now that support continued access to mortgage credit for American families, promote a responsible transition, and protect taxpayer interests,” Stegman said.
In a statement released by FHFA, acting director Edward DeMarco said the PSPA modifications will help build a future for the operations of the GSEs.
“These changes provide certainty to Fannie Mae, Freddie Mac, and market participants as they continue to perform their critical mission of providing liquidity and stability to the country’s housing market. The steps today are also important as Congress and policymakers contemplate the future of Fannie Mae and Freddie Mac,” DeMarco said.
Fitch Foresees Troubles for FHA as Delinquencies Rise
Times haven’t been too swell for the Federal Housing Administration. That was apparent, by some accounts, when the agency raised insurance premiums for lenders of single-family mortgages in February, a choice it made to shore up its crisis-weary Mutual Mortgage Insurance Fund.
Now, according to Fitch Ratings, a new tide of mortgage delinquencies and price declines may tip the fund back toward troubled waters – and possibly insolvency.
The ratings agency said Friday that it sees problems arising from a difference between 90-day past due delinquency patterns for home loans backed by the agency and those without government guarantees.
“This may eventually force the FHA to look for opportunities to put back some defaulted loans to the banks, particularly if the agency’s funding status worsens and U.S. home prices fail to rebound quickly,” it said in a statement.
According to Fitch, the FHA’s fiscal position benefited from the raise in upfront premiums but stays “very weak” in lieu of its inability to meet a congressionally required 2 percent capital buffer.
The FHA capital ratio buffer currently stands at just 0.24 percent.
The ratings agency found that government-backed mortgages constitute 83 percent, or about $66 billion, of 90-day past due delinquencies currently out there on the market.
“This highlights the dimension of the growing delinquency problem for the FHA, given the predominant position of FHA-guaranteed loans in the troubled asset categories of major banks,” Fitch said. “While delinquency rates for nonguaranteed loans have been improving steadily at these institutions, the trend for FHA-guaranteed loans is starkly different.”
A down-payment requirement increase on its way will likely worsen matters for the FHA, according to Fitch, which said that it expects the agency to resort to “unconventional” practices in order to prevent a bailout scenario and shore up the beleaguered fund.
The scenario isn’t far-off from a crisis several experts predicted last year. Joseph Gyourko, a real estate and finance professor at the University of Pennsylvania, reported last fall that the $2.6 billion capital deficit vis-à-vis $1 trillion in insurance-in-force could mean a bailout.
Just by how much? Anywhere from $50 billion to $100 billion, according to Gyourko. If a bailout took place, it would be the first for the FHA in its nearly 80-year history.
Speaking with MReport for a past interview, FHA Acting Commissioner Carol Galante defended the role that premium raises play in keeping the agency afloat. “We think this is appropriate, but we have to do it carefully and gradually,” she told us.
Funny, this is very different from a report two weeks from FHA stating that they had increased their reserve funds.
Squatters impact prices as the decline happens as soon as people go delinquent, probably due to their lack of maintenance. Foreclosures are the cure as prices rise a year after the foreclosure is complete.
Study: Delinquency Affects Neighboring Prices More than Foreclosure
A working paper released by the Federal Reserve Bank of Atlanta suggests that foreclosures may not negatively impact nearby property prices as much as originally thought.
The paper examines and refutes the argument long used by experts that mortgage foreclosures greatly reduce the sale prices of properties in the area. The Atlanta researchers approached the issue using a new dataset that takes into account the stage of the foreclosure process on a property and the property’s condition.
The Atlanta Fed’s paper includes research on mortgage loans that are seriously delinquent, as well as REOs and the number of properties recently sold by the lender. The study also includes minor delinquencies, defined by the researchers as delinquencies less than 90 days.
This more open approach allows for the possibility that the foreclosure externality (the effect of the foreclosure on neighboring properties) might occur before the process is actually completed.
The study actually found while neighboring home prices do tend to sink when a property becomes distressed, the effect is only minor. Furthermore, the effect appears when the borrower first becomes seriously delinquent on the loan and disappears approximately one year after the foreclosure is sold.
Because foreclosure externalities peak before the process is completed, the Atlanta Fed concluded that issuing a foreclosure moratorium would do nothing but draw out the delinquency period, making the problem worse.
“Our results suggest that they key to minimizing the costs of foreclosure is to minimize the time that properties spend in serious delinquency and in REO. On one hand, this implies putting pressure on lenders to sell properties out of REO quickly. On the other hand, and perhaps much less palatably, it implies minimizing the time a borrower spends in serious delinquency, which means accelerating the foreclosure process,” the paper read.
The paper argues that the likely explanation for the drop in surrounding home prices is the “investment externality effect,” or the tendency of borrower and lenders underinvesting in property maintenance because they have nothing to gain from a distressed or foreclosed property. As a result, the home falls into disrepair, and nearby prices suffer.
The researchers also debate against the possible explanation that an increasing supply of houses on the market (boosted by foreclosures) could give buyers more bargaining power:
“If we thought foreclosed properties were driving down prices by competing with non-distressed sales, then we would expect, at the very least, that the properties in above average condition would have the same effect as properties in below average condition and, indeed, we might even expect the above- average properties to generate even more competition,” the paper read.
I hope reports like this get them to rethink holding back inventory. I’m hoping to get a house in late 2013 but the lack of inventory in Las Vegas is staggering.
“At least they are openly admitting what they are doing. Apparently, despite the anti-trust violations, everyone is okay with the GSEs saving taxpayer’s money at the expense of future buyers. ”
Sometimes I think they don’t care if they are violating anti-trust laws. If they are sued they just get another tax funded bailout.
Yep. When their too big to fail, they have no downside. They can do whatever they want.
This market is crazy! There are just a few homes for sale in my neighborhood. The one comp to mine just sold this weekend for a price I never imagined we’d see. I could sell today and actually walk away with a check – albeit very small. I am seriously considering listing it and renting a larger home.
It might not be a bad idea. Get out while the gettin’s good.
Your reaction is interesting. Most homeowners (you’re no longer a loanowner) would immediately become kool-aid intoxicated and think their back “in the money” so they should hold out for more.
Time to sip on some of that HELOC???
Let the good times roll!
I remember the HELOC ATM cards. You didn’t have to write a check, just use the ATM card.
Perspective, I take it you think this “mini rally” we are seeing will be short lived. Probably correct, but everybody who has bet against the Fed has lost. I wouldn’t be surprised to see 2.X percent interest rates and even lower available inventory in the futre…what do you think that will do to home prices?
Landlords are also wising up to the no inventory/low interest rate gig (just my first hand knowlege). They’ll likely keep sending yearly rent increases. Are you going to threaten to quit renting and buy a house?
This is a two edged sword, be careful. As we have seen from this blog there are many fringe benefits to being a loan owner that renters simply don’t get. If the economy goes to absolute hell, I wouldn’t be surprised if the powers that be give loan owners a mortgage holiday while renters can pound sand (sounds crazy…but I wouldn’t doubt it after all the shenanigans we have seen). Good luck whatever you do.
I hear you. The idea of selling it today and enjoying freedom for a year or two is enticing after spending the last five years distressed about our home’s value, but I know there are no sure things in this economy/housing situation.
The plan is to refi it soon (accumulating cash to get down to $417K – the conforming loan limit). Then we could rent it out in the next year or so, or sell it.
Great interview with Barry Ritholtz.
Barry Ritholtz on the Ghosts Haunting the US Housing Market
This will be posted on the North Blog tomorrow…
US taxpayers bail out California homeowners, as banks fail to pay their share
By William La Jeunesse Published August 20, 2012 FoxNews.com
Contrary to what voters were led to believe, California took the unprecedented step this month to give banks and struggling homeowners up to $100,000 in taxpayer funds to reduce underwater mortgages.
Originally, banks and lenders were supposed to pay 50 percent of the cost of reducing the principal for those whose homes are worth less than their mortgage. But when the banks refused, California took the controversial step of paying the entire amount, up to $100,000.
“We thought, you know, 50-50 was much more attractive and we’d have much more traction with lenders, and it just didn’t turn out to work as well as we would have liked,” said Diane Richardson, legislative director of the California Housing Finance Agency.
The program, known as the Hardest Hit Housing Market fund, is part of a $7.6 billion federal effort to help underwater homeowners in 18 states. California received $2 billion. But when banks and lenders who service loans refused to write down even a small portion of the negative equity loans, California decided to use the taxpayer money to pay 100 percent of the mortgage reduction.
Richard Green, a professor of real estate at the University of Southern California, said it’s not what taxpayers signed up for.
“I think taxpayers would be furious at the idea that everybody gets completely off the hook for this,” Green said. “There are people that say, look, I’ve been a renter all these years, I’ve been paying my mortgage all these years, why am I bailing out these people who made a bad decision? I think the politics of it are very combustible.”
Back in 2009, President Obama and other lawmakers discussed the “moral hazard” such federal programs represented. If you help some homeowners, will others abuse the system because they know others will pay up the tab? How many borrowers would purposely fall behind on their payments in the hopes of getting an principal reduction is anyone’s guess, but mortgage giants Fannie Mae and Freddie Mac recently rejected the idea of cutting loan balances, saying savings did not justify the cost.
“A solution that doesn’t take a little bit of flesh from both borrowers and lenders I think is problematic,” Green said. “I do think there needs to be a less sum … of taxpayer money in reducing these balances. I just think borrowers should have to pay for something and lenders should have to pay something for this.”
“I don’t know where the blame belongs. I mean, we thought we were creating something that was attractive, and banks would participate,” Richardson said. “But look at the magnitude of this crisis. If we just step aside and let all these homes go into foreclosure, I mean, I continue to make my mortgage payment, too. And I am acutely aware of every home that goes into foreclosure in my neighborhood, my property values are going down. So if we can help save some of these people, you know, that’s to my benefit.”
As a result of paying 100 percent of the cost of each mortgage write-down, the number of troubled homeowners California can help from 25,000 to fewer than 9,000. In April, Cynthia Romero, inspector general of the TARP program, criticized the Hardest Hit fund, saying states have misused the money, and she blamed the Treasury Department for failing to require banks and lenders to participate in the program before allocating the money to states. She said states lacked leverage to recruit servicers or banks to play.
California made two other changes to accommodate lenders and homeowners. Banks will now get 100 percent of the write-down money in the first year, not in three installments. Secondly, homeowners will not have to pay back the money if the home is sold at a profit – provided they make their payment and stay in the home for five years.
This is a far cry from this statement Obama made in April in 2009 in Phoenix: “So this part of the plan will require both buyers and lenders to step up and do their part and to take on some responsibility.”
The Hardest Hit fund was signed to help those markets where a majority of homes for sale were actually underwater. As of December 31, just 3 percent of the $7.6 billion had been spent, and housing prices in most markets have already begun to recover. Nevertheless, the federal government is not recalling the money.
With so few homeowners being helped some doubt the mortgage write-down will stabilize any market, nevertheless Green says spend away.
“At the end of the day, you have a choice, do you want to be sanctimonious or do you want to solve the problem. And I want to solve the problem. Is this unfair? Absolutely. A lot of things in life are unfair. But to clear out the inventory in certain parts of the country I think it is necessary to do something like principle reduction.”
That’s outrageous. I may cover this story too.
That is crazy, but if you understand how government works, not so much. The state has a pool of money available to it and will lose it if it goes unspent. The fact that lenders won’t take 50% deals is no deterrent.