Helping to Facilitate Short Sales
Robert Klein, Founder and Chairman of Safeguard Properties, contributed an article to REOMac Update titled, Helping to Facilitate Short Sales.
Helping to Facilitate Short Sales
Two years ago, the high rates of defaults and foreclosures were blamed on subprime loans with variable rates. But subprime loans are gone, and defaults and foreclosures continue to occur at the same pace.
The Mortgage Bankers Association reported recently that in the first quarter of 2010, more than one-third of new foreclosures were on prime loans with fixed rates. These are loans held by what would normally be considered the safest borrowers with good credit scores.
We now know that the real culprit in the housing crisis is unemployment. As long as the unemployment rate remains at ten percent, borrowers will not be able to afford their mortgage payments, even if they take advantage of loan modification programs available to them.
The federal government launched the Home Affordable Foreclosure Alternatives (HAFA) program in an attempt to increase short sale activity as an alternative to foreclosure. And many servicers are making short sales a priority over REO sales. Recently Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions reported that more than 17 percent of home purchases were the result of short sales.
High inventories of vacant properties invite all of us working in and on behalf of the mortgage industry to identify and explore new and better ways to help banks and servicers facilitate short sales to move defaulted loans from their portfolios.
More importantly, our goal should be to reduce vacancies in defaulted properties and to assure that they remain viable and attractive for new homeowners to raise families. The faster a defaulted property can be sold, the less likely it is to become a troubled vacant property.
Opportunity with for-sale defaulted properties
As a proactive measure to help defaulted homeowners avoid foreclosure, and to reduce the number of vacant properties in their portfolios, servicers have attempted to communicate with borrowers to initiate workouts and loan modifications. Unfortunately, many borrowers have been either frightened or misinformed and thus have not responded to these outreach efforts.
As a result, even though many defaulted homeowners have their properties listed for sale, their lenders and servicers are not aware. These are opportunities lenders and servicers are missing to pursue short sales.
If these defaulted homes do not sell, it is likely that many will eventually be abandoned by the homeowner. Once abandoned, these properties will lose value faster, cost the servicer more in inspection and maintenance costs, and become nuisances in their neighborhoods.
In Safeguard Properties? system alone, more than 40,000 pre-sale properties are listed for sale. While some are vacant, most are occupied, and they present an opportunity for lenders and servicers to prevent larger loan losses by proactively pursuing a short sale.
All property preservation companies should be reporting these properties to their clients, including the name and phone number of the broker and any other listing information that is available.
Safeguard began reporting this information to its clients several months ago, and although we do not have data on the results, our clients have expressed appreciation and an interest in continuing to receive the information.
As servicers refocus their energies on short sales, more REO brokers have shifted their strategies to incorporate short sales as well.
Field servicers and real estate brokers have had a long-standing relationship working together to maintain and market REO properties. The short sale market offers an opportunity for our industries to unite in the interests of homeowners, lenders and servicers, neighbors and entire communities. Reduced housing prices and short sales also create homeownership opportunities for first time buyers who could not afford to purchase a home in the future.
In the end, we all benefit when we work together to reduce the time a property is vacant and help assure that properties retain their appeal as owner-occupied residences, and neighborhoods remain safe, attractive and vibrant places for homeowners to raise their families, work and play.
Robert Klein is founder and chairman of Safeguard Properties, the largest privately held mortgage field services company in the U.S.
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Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with approximately 800 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.