Banks May Be Forced To Accept Short Sales On Homes

[red states rule]

This will do wonders for the US economy, encourage banks to lend, and investors to put up money for home loans

Now the "economic genius" known as Obama wants to FORCE lenders to accept less then the amount to pay off the loan and allow the borrower to walk away from their home and obligation

Once again, liberals want to reward failure with your tax money





Program Will Pay Homeowners to Sell at a Loss
By DAVID STREITFELD
Published: March 7, 2010


In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

http://www.nytimes.com/2010/03/08/business/08short.html

[crin63]

If I understand short sales correctly. The homeowner who sales their house in a short sale has to add the forgiven difference of what the sale price is vs. the loan amount to their personal income for the year and pay taxes on it.

So If the loan amount is $500,000 and the house sells for $275,000 then the homeowner has to add $225,000 to their annual income for the year and pay income tax on that additional amount.

Is that correct?

[red states rule]

If I understand short sales correctly. The homeowner who sales their house in a short sale has to add the forgiven difference of what the sale price is vs. the loan amount to their personal income for the year and pay taxes on it.

So If the loan amount is $500,000 and the house sells for $275,000 then the homeowner has to add $225,000 to their annual income for the year and pay income tax on that additional amount.

Is that correct?

Correct. I get calls everyday from pissed off borrowers who are getting 1099's in the mail and being told they have to pay taxes on the written off debt

Now the government wants the banks to eat the money. This will not help the housing market or encourage banks to lend the money

Since when does the government have the power to step in and change the terms of a loan? The government wants to force them to give up their legal contract rights.

[Nukeman]

This will do wonders for the US economy, encourage banks to lend, and investors to put up money for home loans

Now the "economic genius" known as Obama wants to FORCE lenders to accept less then the amount to pay off the loan and allow the borrower to walk away from their home and obligation

Once again, liberals want to reward failure with your tax money

Here's my thought on short sales. Say a person lives in a house for 5 years and looses their job and can no longer make the payment.

Lets start with a 100,000 mortgage of 30 years. They have payed an average of 1,000 dollars a month for 5 years that is 60,000 dollars. They still owe 93 thousand dollars on the house and if they short sell the house for anything more than 40,000 dollars the bank is out NOTHING. The person is out all their equity and such. So where is the LOSS for the bank??

This really is just banks being more greedy and attempting to get more than something is worth and that is what put us in the mess in the first place... False prices!!!

[red states rule]

Here's my thought on short sales. Say a person lives in a house for 5 years and looses their job and can no longer make the payment.

Lets start with a 100,000 mortgage of 30 years. They have payed an average of 1,000 dollars a month for 5 years that is 60,000 dollars. They still owe 93 thousand dollars on the house and if they short sell the house for anything more than 40,000 dollars the bank is out NOTHING. The person is out all their equity and such. So where is the LOSS for the bank??

This really is just banks being more greedy and attempting to get more than something is worth and that is what put us in the mess in the first place... False prices!!!

It is not greed - they loaned the money for the property and took a risk. the borrower agreed to the terms and took the loan

The process is long and expensive to take the property back

So now legally binding contracts are now worthless? People can walk away from their obligations?

Who will loan money if this is the case? Who woild want to take the risk? This wil onyl make the economy sink further

Greed did not put us in this mess. It was Dems who pressured banks to loan money to people who could not afford the hoimes - they said owning a home was a right - not something that you had to work for

BTW, banks are bending over backwards to help people. Have you heard about loan modifications? I have seen loans where the rates have been reduced to as low as 2%

And yes people still default on the loans

[red states rule]

BTW Nukeman, a huge factor in defaults is now people with ARM loans, but local government jacking up taxes

If you have an escrow account, your payment can increase by huge amounts. I have seen payments go up as much as $400 - $500 per month due to tax increases

The people who live in NJ, NY, CA, MI, and PA pay huge taxes and even with a fixed rate loan, they see their payments skyrocket

But the liberal media never mentions that fact. People blame the banks "for raising their payments" but the extra money goes to the local tax office

[Nukeman]

It is not greed - they loaned the money for the property and took a risk. the borrower agreed to the terms and took the loan

The process is long and expensive to take the property back

So now legally binding contracts are now worthless? People can walk away from their obligations?

Who will loan money if this is the case? Who woild want to take the risk? This wil onyl make the economy sink further

Greed did not put us in this mess. It was Dems who pressured banks to loan money to people who could not afford the hoimes - they said owning a home was a right - not something that you had to work for

BTW, banks are bending over backwards to help people. Have you heard about loan modifications? I have seen loans where the rates have been reduced to as low as 2%

And yes people still default on the loansThat is not what I said and you know it... What I am pointing out is that after 5 years of paying on 100,000 dollar mortage that only about 7,000 dollars has been payed on principle and the other 53,000 is PURE PROFFIT for the bank and for them to not utilize a short sale is stupid on their part since they really aren't out any money. What the hell did these banks do with the 60,000 that was already payed on a 100,000 mortage?????

You know as well as I that on a 30 year mortage you will pay back 3X wht the value of the proterty is!!!!!!! Tell mether is no greed involved with that. and also the banks have been going to 40 and even 50 year mortages to get people into a bigger and better house I won't even haszard a guess as to what the total payments would be on those.....

[Nukeman]

BTW Nukeman, a huge factor in defaults is now people with ARM loans, but local government jacking up taxes

If you have an escrow account, your payment can increase by huge amounts. I have seen payments go up as much as $400 - $500 per month due to tax increases

The people who live in NJ, NY, CA, MI, and PA pay huge taxes and even with a fixed rate loan, they see their payments skyrocket

But the liberal media never mentions that fact. People blame the banks "for raising their payments" but the extra money goes to the local tax office

Ohh I know what you mean. We don't escrow anything in our mortgage and thank God our gov decided to CAP the total you can charge on property tax to 1% of assessed value!!!

[HogTrash]

Here's my thought on short sales. Say a person lives in a house for 5 years and looses their job and can no longer make the payment.

Lets start with a 100,000 mortgage of 30 years. They have payed an average of 1,000 dollars a month for 5 years that is 60,000 dollars. They still owe 93 thousand dollars on the house and if they short sell the house for anything more than 40,000 dollars the bank is out NOTHING. The person is out all their equity and such. So where is the LOSS for the bank??

This really is just banks being more greedy and attempting to get more than something is worth and that is what put us in the mess in the first place... False prices!!!Wrong, government interference caused the mess.

You definately have liberal thought processes, Nukeman.

Liberalism promotes class warfare and hatred for banking and finance.

Banking has made possible the things that have brought about progress and modern civilization.

[Nukeman]

Wrong, government interference caused the mess.

You definitely have liberal thought processes, Nukeman.

Liberalism promotes class warfare and hatred for banking and finance.

Banking has made possible the things that have brought about progress and modern civilization.

You know what HT, FUCK YOU.

Contrary to what you believe, I do think there are a lot of people who placed themselves in the situation where they can't afford what they borrowed.

Banks made this mess with the help of the government pushing for lax lending policies. I think your old enough to remember when you had to APPLY for credit and the bank decided if you were a good risk or not.

Fast forward 20 years and they lend to ANYONE with a heart beat and some that don't. So get off your freaking horse of telling me I have leanings this way or that.

I lean towards PERSONAL RESPONSIBILITY for the borrower and the LENDER!!! Get moron????????

[HogTrash]

You know what HT, FUCK YOU.

Contrary to what you believe, I do think there are a lot of people who placed themselves in the situation where they can't afford what they borrowed.

Banks made this mess with the help of the government pushing for lax lending policies. I think your old enough to remember when you had to APPLY for credit and the bank decided if you were a good risk or not.

Fast forward 20 years and they lend to ANYONE with a heart beat and some that don't. So get off your freaking horse of telling me I have leanings this way or that.

I lean towards PERSONAL RESPONSIBILITY for the borrower and the LENDER!!! Get moron????????The fact is, no lending institution would have dared made such high risk loans without congressional interferance, mainly Barney Frank and Harry Reid.

The guilt lies with the democrats and government and yes, the ignorant borrowers who have little to lose, that lined up to score these [NINJA] loans.

[PostmodernProphet]

the bank is out NOTHING. The person is out all their equity and such. So where is the LOSS for the bank??


???....banks don't create money.....they pay people interest on their CDs and other deposits so they have money to loan for mortgages......if the people who took out the cash in second mortgages and used to for vacations and buying cars and big screen tvs don't have to pay it back to the bank, can the bank call up the people with savings accounts and so, "sorry, we're taking back that interest we paid you on your saving accounts"........of course the bank has losses......

[red states rule]

That is not what I said and you know it... What I am pointing out is that after 5 years of paying on 100,000 dollar mortage that only about 7,000 dollars has been payed on principle and the other 53,000 is PURE PROFFIT for the bank and for them to not utilize a short sale is stupid on their part since they really aren't out any money. What the hell did these banks do with the 60,000 that was already payed on a 100,000 mortage?????

You know as well as I that on a 30 year mortage you will pay back 3X wht the value of the proterty is!!!!!!! Tell mether is no greed involved with that. and also the banks have been going to 40 and even 50 year mortages to get people into a bigger and better house I won't even haszard a guess as to what the total payments would be on those.....

Pure profit? Wow, i guess in the case of my company they do not have to pay salaries, SS taxes, healcare costs, and other employee costs out of the interest they earn

Or infrastructure costs. Heating, A/C, snow removal, cleaning and routine maintance. Property taxes and landscaping costs

Office equipment - chairs, desks, phones, computers, towers, paper, pens, ect

Damn, pure profit eh?

The total breakdown of what the borrower will pay in interest is on several colosing documents they SIGNED. It is the law

If you have ever financed a car NK, the interest is front loaded as well. Should the government step in and change the terms of car loans as well?

The 40 years loans did not work out well, and as far as I know, my company no longer offers them

[red states rule]

The fact is, no lending institution would have dared made such high risk loans without congressional interferance, mainly Barney Frank and Harry Reid.

The guilt lies with the democrats and government and yes, the ignorant borrowers who have little to lose, that lined up to score these [NINJA] loans.

From the NY Times - please note the date




September 30, 1999

Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.

”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation’s biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites..

http://bsimmons.wordpress.com/2008/10/01/1999-ny-times-fannie-mae-eases-credit-to-aid-mortgage-lending/

[red states rule]

You know what HT, FUCK YOU.

Contrary to what you believe, I do think there are a lot of people who placed themselves in the situation where they can't afford what they borrowed.

Banks made this mess with the help of the government pushing for lax lending policies. I think your old enough to remember when you had to APPLY for credit and the bank decided if you were a good risk or not.

Fast forward 20 years and they lend to ANYONE with a heart beat and some that don't. So get off your freaking horse of telling me I have leanings this way or that.

I lean towards PERSONAL RESPONSIBILITY for the borrower and the LENDER!!! Get moron????????

Note the reaction of Dems when Pres Bush and Republicnas saw the mess that was coming

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[HogTrash]

From the NY Times - please note the dateThe cause of the US financial crises has never been a mystery to many people including me.

Why?

Because I have learned not to rely on main stream media journalism for reliable information.

I was not even surprised when it happened...It was in fact common knowledge to anyone paying attention.

This is the transcript of a statement Ron Paul made before Congress on July 9, 2008, just 6 months before the economy crashed.

If you never read anything else, read Dr Pauls statement in the link below...It is fascinating.

"Something Big Is Happening" http://www.house.gov/paul/congrec/congrec2008/cr070908h.htm


Note the reaction of Dems when Pres Bush and Republicnas saw the mess that was coming

<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/cMnSp4qEXNM&hl=en_US&fs=1&"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/cMnSp4qEXNM&hl=en_US&fs=1&" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>IMO, the reason for this mess lies entirely with American journalism for not reporting this coming catastrophe when there was still time to stop it or at least lesson it's severity.

Journalist are suppose to be the people's government watchdogs but now days instead of being motivated by truth and facts they are agenda driven by liberal activism.

[red states rule]

The liberal media waved the pom poms in support to giving home loans to people who should have remained RENTERS. To them, like the Dems - home ownership is a right and not something you work for and save money for

No, they are ENTITLED to a home and the banks needed to ease their credit requirements

Barney Frank said it all when asked if these people default on the loans - he said the US government would make good on the loans

The rest as they say is history

Now it is the banks fault. They should not expect those who can't afford the home, to actually honer the contract they signed. The banks need to eat the money, and let the borrower get away from paying what they agreed to pay

Like the US Constitution, liberals believe a legal contract can be changed at anytime to fit their current views of the times

[crin63]

Sure, its aggravating and borders on criminal that banks frontload all the interest in a loan, but everyone knows (or ought to know that) that going in.

Yes the deck is stacked in the banks favor but thats because they are (or were until recently) the only party putting something at risk. Its a for profit business, not a non-profit entity.

Had the Dems not forced them to give bad loans we wouldn't have this housing mess in the 1st place.

[red states rule]

Sure, its aggravating and borders on criminal that banks frontload all the interest in a loan, but everyone knows (or ought to know that) that going in.

Yes the deck is stacked in the banks favor but thats because they are (or were until recently) the only party putting something at risk. Its a for profit business, not a non-profit entity.

Had the Dems not forced them to give bad loans we wouldn't have this housing mess in the 1st place.

It does make sense Crin. If your interest is based on the unpaid principal balance - logic should tell you the interest would be more in the beginning. It is not criminal Crin - it is Finance 101

Car loans and personal loans are the same way. The interest is front loaded

With more and more government interference, investors and banks will NOT be loaning the moeny and taking the risk. Rates will increase on those laons they do make

And the libs will bitch and whine, blame the banks, and never admit they are the cause of the problem

[crin63]

It does make sense Crin. If your interest is based on the unpaid principal balance - logic should tell you the interest would be more in the beginning. It is not criminal Crin - it is Finance 101

Car loans and personal loans are the same way. The interest is front loaded

With more and more government interference, investors and banks will NOT be loaning the moeny and taking the risk. Rates will increase on those laons they do make

And the libs will bitch and whine, blame the banks, and never admit they are the cause of the problem

I know its not criminal and I understand why, it just seems like it ought to be some times, LOL!

[red states rule]

I know its not criminal and I understand why, it just seems like it ought to be some times, LOL!

As far as I can remember it has always been like that. I did a double take when I bought my first new car when I saw how much I would end up paying

I doubled up and sometime tripled up on the payments to save on the interest