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Thursday, February 25, 2010

The Year of the Short Sale and more Foreclosure Delays

by Calculated Risk on 2/25/2010 09:30:00 PM

Two informative articles ...

Diana Golobay at HousingWire reports on the Mortgage Bankers Association (MBA) National Mortgage Servicing Conference 2010 in San Diego: Mortgage Servicers Kick Around HAMP Mod Options

... a session called “Loss Mitigation – When HAMP is Not an Option” proved to be extremely popular.
The shift away from the government plan marks a shift in the strategy of servicers as 2009 “was all about HAMP” in terms of allocating time and resources, according to Alanna Brown, director of government programs and new initiatives at Fannie Mae National Servicing Organization.
Rich Rollins, CEO of Infusion Technologies, said servicers are seeing increasing potential in short sales and leaseback options.

He agreed with a general mentality at the conference that 2010 — and even 2011 — looks to be the “year of the short sale,” which he said gives investors “immediate positive cash flow” as a non-retention strategy.

“HAFA gave [the short sale] credibility,” he told HousingWire.
There is much more in Diana's article.

Note: HAMP stands for the Treasury program: ""Home Affordable Modification Program", HAFA is part of HAMP and stands for "Home Affordable Foreclosure Alternatives" and is for short sales and deed-in-lieu (DIL) transactions.

And apparently the administration is considering more changes to HAMP, from Dawn Kopecki at Bloomberg: Obama May Prohibit Home-Loan Foreclosures Without HAMP Review
The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.

The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.
The only obvious solutions for when current modification efforts fail are: 1) private principal reduction (but not paid for by taxpayers since that would be very unpopular), 2) converting homeowners to renters for some period, and 3) short sales / DIL.

Delaying tactics just drag out the problem ...