Obama is handing out $3,000 to short sellers

Our U.S. Treasury stands ready to hand out checks to homeowners to help them with short selling their home!    Ok, not exactly but the Obama Administration is pledging to chip in to help homeowners who are underwater and need to sell their home.

Bank of America, clearly our Nation’s leading “uplifting promise to do something press release” mortgage banker, immediately stepped forward to claim,

“The new program will give us a degree of efficiency that we have not had in the past,” said Matt Vernon, Bank of America’s executive in charge of short sales and foreclosed properties.

Why? Well as USA Today is reporting.

Along with the financial incentives, the new government program makes another key change. Mortgage companies will have to set their minimum bid before the house is listed for sale.  If the offer is above that, the lender must accept it.

That’s a big change from current practice. Lenders generally don’t calculate how much money they are willing to accept on a short sale until they have an offer in hand, causing long delays before the sale is approved.”

Hold the presses!!!! You mean the bank is going to calculate an amount they are willing to take BEFORE considering a short sale!   This is absolutely amazing.  I bet not a single bank today has any idea of what they will take for an offer.   I heard they simply throw darts at a board with a bunch of dollar amounts.

WAKE UP!!    Of course, they already have a number they are willing to take! Give me a break.

Oh and by the way… loans currently under the Freddie and Fannie umbrella aren’t eligible.

Let me tell you very simply how this is going to work:

1. The bank has a number that is very close to payoff or full market value whichever is higher.   This will be the target for the homeowner to try and reach for a “pre-approved” short sale bid.
2. The $3K, the homeowner is supposed to receive to help move, will be used to pay for outstanding items like property taxes, HOA bills, real estate commissions, closings cost, etc.  How do we know this?  Because the FHA through HUD already gives homeowners $1,500 to move.  Guess what?  It almost always goes in its entirety to pay for seller related selling costs.
3. There will be the standard long wait time to get approved for a short sale if you don’t reach the “pre-approved bid amount”.

Bottom Line:   This program will do nothing to speed up the process except for buyers BUT it will give a little wiggle room at the end of the sale to cover a seller’s outstanding past due bill.  Hey, something is better than nothing.

-          The Bank Slayer

Below is the USA Today article….

Short-sale program aims to help ‘underwater’ homeowners

WASHINGTON — The government launched an effort on Monday to speed up the time-consuming, often-frustrating process of selling your home if you owe more than it’s worth.

The Obama administration will give $3,000 for moving expenses to homeowners who complete such a sale — known as a short sale — or agree to turn over the deed of the property to the lender. It’s designed for homeowners who are in financial trouble but don’t qualify for the administration’s $75 billion mortgage modification program.

Owners will still lose their homes, but a short sale or deed in lieu of foreclosure doesn’t hurt a borrower’s credit score for as much time as a foreclosure. For lenders, a home usually fetches more money in a short sale than a foreclosure. And the bank avoids expensive legal bills, cleanup fees and maintenance costs that follow a foreclosure.

“It’s very traumatic and embarrassing and frustrating to go through a foreclosure,” said Laurie Maggiano, policy director of the Treasury Department’s homeownership preservation office. With a short sale, she said, “your financial issues are your own problem and not neighborhood conversation.”

Falling home prices and lost jobs have forced many sellers into this position. For example, in Orange County, Calif., short sales made up about 26% of the market in March, compared with 17% a year earlier, according to data complied by Altera Real Estate, a local brokerage. In the Minneapolis-St. Paul metro area, about 12% of all deals since October were short sales, up from about 8% a year earlier, according to the Minneapolis Area Association of Realtors.

The expanded incentives will help accelerate short sales, said Mark Zandi, chief economist at Moody’s Analytics. He expects 350,000 homeowners nationwide to use the program through the end of 2012, more than double his earlier forecast.

A short sale appears to be the only way out for Brandee Chambers, 36, of Las Vegas. She got into trouble during the housing boom by taking out a risky loan against her home and using the money to buy two investment properties in Phoenix.

Along with the financial incentives, the new government program makes another key change. Mortgage companies will have to set their minimum bid before the house is listed for sale. If the offer is above that, the lender must accept it.

That’s a big change from current practice. Lenders generally don’t calculate how much money they are willing to accept on a short sale until they have an offer in hand, causing long delays before the sale is approved.

The new program “will give us a degree of efficiency that we have not had in the past,” said Matt Vernon, Bank of America‘s executive in charge of short sales and foreclosed properties.

Under the new process, buyers who submit an offer to purchase a home in a short sale should get a response within two weeks, as opposed to months. If that happens as planned, it would be a big improvement. Real estate agents across the country have complained that lenders are often difficult to reach, sometimes only communicating by e-mail and infrequently at that.

“You’re one of 400 properties on a screen,” said Dave Bauer, a real estate agent in Danville, Calif.

Some real estate agents who specialize in short sales are optimistic. “It could be the first government program that actually helps Las Vegas,” said Steve Hawks, a real estate agent there who specializes in short sales. Most borrowers in Las Vegas, he said, owe so much more on their mortgages than their properties are worth they can’t qualify for a loan modification.

The Treasury Department outlined the plan last November, but doubled the original $1,500 in relocation money after realizing that many homeowners need more cash to move out. That’s because landlords usually want large deposits from people whose credit records have gone sour after missing mortgage payments.

However, there are plenty of restrictions. To qualify, the home needs to be a borrower’s primary residence. Homeowners either have to be behind on their mortgages or on the verge of becoming delinquent.

Currently, the program is not available for mortgages owned or guaranteed by mortgage finance companiesFannie Mae and Freddie Mac, though the two government-controlled companies will soon follow suit, said the Treasury’s Maggiano.