I'm still wondering, at the end of the day, who's gonna take it in the shorts for all these foreclosures, walk-aways and short sales to come?
China? Local banks? Fannie? Freddie? Who the heck owns these houses anyway? 'Cause it's definitely not the people living in 'em (with their no-down, no-doc, no-interest underwater mortgages). Tell me who that ultimate bag holder is and we'll short them to high heaven. Blood will be in the their streets.
Lenders are reporting more home owners are defaulting on their mortgages. But before those defaults turn into foreclosure, some sellers are turning to short sales -- if lenders agree.
Home owner Gloria Romero is in that position now. She bought her three-bedroom home in North Sacramento last year but has to sell it. She has listed the home for $250,000 hoping to cover her mortgage balance. Thursday she received her first offer -- $219,000. That's some $30,000 less than her mortgage.
So, Romero is turning to a short sale instead of letting the bank takeover the house.
A short sale is when the lender accepts an offer that is less than the current balance. Not many lenders are accepting these negotiated transactions because it affirms the real estate market has settled from its accelerated growth that drove prices up in the first half of the decade.
"Back in the '90s, I became the short sale guru in Sacramento and did several hundred of them," Williams said.The realtor says he's working with another home owner in Natomas who has to move and has received an offer of $399,000 for her home. That is about $60,000 less than what she owes on it.
June 05, 2006
Sign of a Housing Panic #212: Banks start taking less than they're owed
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16 comments:
Your post asks some intriguing questions. Don't know how it is in the US, but in Singapore it's the owner / buyer who's taken losses. Probably because of the cap on mortgage finance (80% of value or transaction price) and the fact that in a smaller market, the impact on credit rating if you default is much more.
I have a post on this at http://www.seavestor.com/blog/?p=14 if you're interested.
I thought a short sale was when the seller owes money at the closing table.
Once the sheeple learn that some people are now selling homes for less then they paid for it a year ago they will be scared. Very scared.
I wondered about that also. If the LENDER agrees to a short sale, who eats the difference. Are they agreeing to take less, or does the FB take it in the shorts!
Normally, if the owner/seller is finanically solvent, they bring money to the closing table, which I had to do after the Boston crash in the early 1990's.
But for most FB's, you can't get blood from a stone, so the bank decides to take less since its still cheaper than taking possesion and setting up an auction.
Hopefully this registers as a default on the FB's credit report so they don't get off scot free since the banker/mtg holder has taken it in the shorts, just cut their losses....
LA Friends raises some serious issues. Some states, especially in the West, have an "anti-deficiency" provision in their mortgage statutes and their deed of trust statutes. These provisions say if the lender gets shorted in a foreclosure sale, on a residence, the lender can't sue for the deficiency.
In a prior cycle, the VA started going after these upside down borrowers anyway. The VA's argument was that we are the federal government, state laws don't apply to us (lawyers call it the doctrine of pre-emption). You can bet Fannie and Freddie are already thinking about this.
Another issue for short sellers: the forgiveness of debt on a short sale is income. If the borrower is truly insolvent (most are) then the Internal Revenue Code says it's not income for tax purposes, but any upside down borrower needs good tax advice before doing a short sale.
Beautiful. I laugh at these stupid jabonies.
I have a problem with letting these people out free, not forcing them to sacrifice for their speculation with other peoples' money.
The Jersey Shore Real Estate Bubble: Why Dwek is Relevant
New Jersey Real estate Mogul owns more than 300 Real Estate properties valued at more than $300 Million but the latest report shows that he OWES some local banks approx. $300 Million too !!!
The Jersey Shore Real Estate Bubble: Why Dwek is Relevant
New Jersey Real estate Mogul owns more than 300 Real Estate properties valued at more than $300 Million but the latest report shows that he OWES some local banks approx. $300 Million too !!!
Its too soon for ths to be happening. In 91 I sold short after high unemployment made it difficult for me to make the payment.
They may begin to do more and more irrational actions which will deepen the financial dilema they are in.
Once you are in too deep, you might as well try for China.
A good stock to short to make money on the upcoming forclosure bonanza is MGIC Ticker MTG.
"Towjam said...
Los Angeles Friends In Deed said...
My understanding is that the creditors can continue to monitor whether there is any "blood in that stone" for 7-10(plus) years. I think there are some new bankruptcy rules that allow the creditors to go after the person indefinitely.
Yea, but they have to keep doing it. Paying someone to do it so I think most just fall off after the 1st time limit expires."
Ever hear of "Zombie Collection Agencies ?" These vampires buy old debts of any kind(sometimes less than a penny on the dollar)
and don't know the meaning of time limit,statute of limitations, and in some cases COURT ORDER ! I understand they are really on the rise.
The 'kid' I work with, age 31, had a catastrophic medical emergency in his family with their first newborn, nine years ago. Wiped them out financially and they had to declare bankruptcy.
All bills wiped clean by the courts,they had NADA! He still gets calls and letters to this day, even at work, demanding money and threatening legal action if he dosen't cough up. He knows the collection agencies have no legal rights, but its still humiliating. Almost nobody wants to declare bankruptcy.
What IS going to happen to China and other foreign countries who are holding these bad loans? Anyone know?
be wary of a cshort sale. as "natural eyebrows" said above - the difference is considered income and liable to income tax. Lot sof people in the 90's didn't know this and we're surprised when they got a 1099 in the mail. Ironic that the person trying to do the right thing and salvage save their credit gets punished by being taxed. i say let them foreclose and fix your credit later. Why give up your house and get taxed on top of it!
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