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Posts Tagged ‘foreclosure moratorium’

The top emailed story on the New York Times website today, Short Sales Resisted as Foreclosures Are Revived, is over 2 days old. That it remains pinned as the top story to share is significant, especially to anyone in New York who is facing foreclosure or in a short sale. Bank of America has, after an absurdly short period of time, ended its moratorium on foreclosures and deemed that its house is in order to resume foreclosures. Aside from the field day that thousands of attorneys will have in the coming years with this, my thoughts are a mixture of dislike for the decision and sadness for borrowers who are in default with Bank of America.

The resistence to short sales is particularly unfortunate. The suspension was hoped to be a catalyst for making short sales a more viable option, but banks have yet to devote sufficient resources to streamline the process. The rationale is a fear of fraud, but fraud only accounts for a minuscule percentage of short sales- like 1 or 2 percent. The other 98 or 99% ought not to suffer because of it. The resumption of foreclosures removes any chances of positive change, unless the government steps in, which the Obama administration seems unwilling to do.

There is a silver lining to the story: The New York Times is finally getting interested in examining why banks resist short sales when they are so much of a better option for all involved. The Times is also starting to follow the money- banks do have some financial incentives, such as accounting practices which you or I could not do to write off a loss, which makes foreclosures more attractive.

Make no bones about it: in the absence of a government with a spine, banks will look at short term gain and little else. Changing their architecture to accommodate short sales is an expense and a learning curve, and they will resort to dumb rationalizations and red tape hell to keep the foreclosure train rolling.

This makes a savvy short sale specialist more of a necessity than ever. We are still batting .900, closing  more than 90% of the short sales we list, and I think it is due in no small part to understanding who, and what, we are dealing with. Choose your agent wisely.

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Being a businessman I seldom delve into politics in this platform, but it is clear to me that part of the problem in affecting a sustainable recovery is a lack of political will in our current leadership, including the White House, after reading this gem in the Times on the foreclosure fraud crisis:

the Obama administration has resisted calls for a more forceful response, worried that added pressure might spook the banks and hobble the broader economy.

So we’ll just spook the borrowers, who are already hammered and traumatized. Protect the banks. Look, I am a brazen capitalist and this is insanity. Insanity! And both parties are culpable.

In our local elections, state Senator Suzi Oppenheimer has been devoting the bulk of her campaign to going negative on challenger Bob Cohen, accusing him of being a slumlord, among other things. Cohen, who apparently owns  a number of buildings in the Bronx, is having tenant complaints and other dirty laundry aired by Ms. Oppenheimer in her bid for re election. This skirts the real issues. Cohen, a real estate guy, for all his blemishes might actually have more insight into our problems than the Senator, who has been in Albany since 1985. This is not an endorsement. It is conjecture. But neither candidate is addressing the issues facing the electorate while we discuss the man’s apartment buildings.

Late last night, in a post entitled Short Sales are the Answer, I said the following:

It is a shame that there is no political will on either side of the isle to hold lenders feet to the fire to affect meaningful change, and defaulted homeowners must contend with a mad race to work a miracle with an uncaring, unresponsive monolithic entity before that monster forecloses, repossesses their home, wrecks their credit and crushes their dreams. This is not progress.

In reading this morning’s NY Times on the White Houses sheepishness (Hey Mr, Obama, can you pretend that Bank of America is General Motors?) and reflecting on Ms. Oppenheimer’s electioneering in lieu of addressing her constituents’ pain, my words are all too sadly true. Forget Washington for a moment. This is Westchester County’s state senate seat. This is our representative in Albany.

Show me someone up for election with the guts to stand up to lender’s unwillingness to change their architecture against short sales, which are a huge part of the solution, and G.O.P., Democrat or Martian, they’ll have my vote.

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Now that Bank of America has joined Chase and GMAC in suspending foreclosures in 23 states (BoA is actually suspending them in all 50), including New York, the entire industry is abuzz with questions as to what the consequences are for the market, a recovery, and most of all, distressed homeowners. Now known as the robo-signing scandal, the issue is calling into question the legitimacy of thousands of foreclosures.

What’s more, with foreclosures halted, what will banks do to dispense with default properties and non-performing loans? The answer to my mind is clear: start paving the way for more short sales. Title is passed from one owner to the next with no interruptions or questions, the process saves the banks both time and money, and more borrowers can move on with their lives with dignity which is all to often a missing element of the current system.

The advantages are enormous:

  • In a short sale, the bank doesn’t have to take 1-2 years to repossess the home. They get their money faster.
  • In a short sale, there are no legal fees associated with a foreclosure.
  • In a short sale, the bank does not have to manage the property, put the utilities in their name, or winterize the property except in rare cases.
  • Short sales are seldom boarded up, vandalized, or vacant. They therefore net the lender more money.

This has always been the case, and made me wonder why banks are so difficult, but with foreclosures off the table short sales now appear to be their only option.  With New York among the states that more lenders are suspending foreclosures, this gives distressed sellers breathing room, and, more importantly to my thinking, dignity.

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