Wednesday, August 29, 2007
The states that I get the most business from are California and Florida. I have received several calls from brokers in Michigan and Georgia, but nobody sending any business from those two states yet. If you don't include the clients that come to me with 48 hours before a sheriff sale or the clients that have Option One as their current lender (Option One will allow a short-sale, but not a short-refi), my success rate has been around 80%-85%. If you include the rest I am more like 70%-75%. Like I have said before, these lenders that are foreclosing on these people do not want to go through a foreclosure. It cost them a lot more money to foreclose, than taking a cut in payment on a short-payoff (whether it be a short-sale or a short-refi). Most of the time, especially in a declining market area, these houses are sold at auction and nobody shows up. which in turn, just creates another problem for them, by having an empty house sitting on their books, that they have to maintain and try to sell through a realtor. It's a lot easier for them to work a short-payoff and be done with the property. Last, you asked why would any lender do a foreclosure bailout in a declining market? I really don't have an answer for you. But, if you look at where probably 90% of the hard money lenders do business, it is California and Florida.I don't know anything about this guy and I am not recommending him, but I have heard of many types of unusual accommodations for buyers. Most borrowers who did not commit fraud will likely have success talking to the lender themselves, as the person posting writes himself.
The bailout proposals are all flawed. The reality is that lenders have to work this stuff out themselves, and they will for most loans that have some rational relationship to the the borrower's income.
The real effect of rapid price drops is to put more bargaining power back in the hands of the borrowers.
We seem to be looking at a nominal 25-28% average loss by mid 2008, if you have to sell. According to listing prices, the average pace of loss in CA has moved up past 1% a month.
But remember, a lot of people were moving up, and did have money to put down. So it's the FTHB of the last few years who likely will walk away. Another floor in CA is that you have a sharply lower homeownership percentage than the norm - signficantly below 60%. So there are quite a few potential buyers when that $400,000 house becomes a $300,000 house, and at that point the tax benefits of owning begin to outweigh the next 5% down.
The market won't recover until after 2010, though.