According to a six-month study by Clayton Holdings in states with extended foreclosure timelines, losses sustained in an REO sale can be 25% higher for the investor than those sustained in a short sale. This is due to the great cost that the lender pays to maintain a foreclosed property and the extended timeframe waiting for it to resell. Foreclosure also negatively affects the homeowner’s credit score and can remain on an individual’s credit report for 10 years or more. Foreclosure can also affect the ability of an individual to be considered for a new home loan.
With these strikes against foreclosures, it’s easy to see why the market is moving toward short sales. Any borrower who either fails or is denied a loan modification should consider foreclosure alternative options.
What Are the Recent Numbers?*
- 7.5 million families in some sort of financial trouble.
- 5.5 million U.S. homeowners are not current on their mortgage.
- 2 million REO properties.
- 3 million HAMP-eligible 60+ day delinquent loans, of which 1.3 million borrowers are likely to be eligible for Home Affordable Modification Program (HAMP) loan modifications.
- As of August 2010, there are 448,937 active permanent modifications.
- The total U.S. delinquency rate was 9.22% in June 2010.
These figures illustrate the great number of short sale homes that exist or have the potential to enter the market. The consensus of short-sale specialists is that negative equity will be a factor for most homeowners for five to eight more years.
The Bremner Group at Coldwell Banker
ABR, CDPE, eAgent, CSP, SFR, HRC, CRE
(O) 310-571-1364 DIRECT
(D) (310) 800-2954
The above content is for informational purposes only and should not be used as a substitute for consultation with a tax advisor.
* Sources: Lender Processing Services August 2010 Mortgage Monitor; DS News; Making Home Affordable Scorecard, Revised September 26, 2010; www.financialstability.gov, August 2010.