Massachusetts Foreclosed Homes

Will Massachusetts Short Sales Get Quicker?

The Federal Housing Finance Agency (FHFA) is directing Fannie Mae and Freddie Mac to streamline their short sale timelines in order to help more homeowners avoid foreclosure, according to a press release issued by McGeough and Lamacchia, which is a real estate brokerage specializing in short sales.

The firm believes these improvements in communication timelines between servicers and borrowers will significantly improve the short sale process.

In a news release dated April 17, 2012, the FHFA outlines new requirements for short sales including the requirement that mortgage servicers review and respond to requests for short sales within 30 days from receipt of a short sale offer.

In the past, lenders have been slow to responding to short sale offers which has frustrated both home buyers and distressed homeowners. Home buyers will now get a quick response when they make an offer on a short sale home, and distressed homeowners will be able to move out of their homes into more affordable housing sooner and avoid foreclosure.

There’s been a lot of pressure recently for banks to improve response times for short sales. In February of this year, Senators Lisa Murkowski (R-AK), Scott Brown (R-MA), and Sherrod Brown (D-OH) introduced a bill, the "Prompt Notification of Short Sale Act," which requires mortgage lenders to make a prompt decision on whether to allow a short sale at the request of a home buyer. The bill is currently awaiting referral to committee.

These new communication timelines apply to both Home Affordable Foreclosure Alternative (HAFA) short sales and regular short sales. They do not guarantee more HAFA short sale approvals, however. HAFA short sales are available for mortgages that are owned or guaranteed by Fannie Mae and Freddie Mac. McGeough Lamacchia Realty says the problem is Fannie Mae and Freddie Mac have been resistant to approving HAFA short sales. McGeough Lamacchia Realty believes that while the guidelines may not increase HAFA short sale approvals, they are a step in the right direction in making short sales easier and will help more people avoid foreclosure.

Short sales are better than foreclosures for distressed homeowners, banks, and communities. Distressed homeowners can transition from a home they can no longer afford more easily through a short sale. Short sales are better for banks because they yield more revenue for banks than foreclosures. Short sales are also better for communities. The homes stay occupied since they go from homeowner to homeowner, and the average selling price for a short sale home is higher than for a foreclosed home, which helps stabilize the neighborhood’s home values.

According to the new guidelines, loan servicers will now be required to provide weekly status updates to the borrower if the short sale offer is still under review after 30 calendar days; review and respond to requests for short sales within 30 calendar days from receipt of a short sale offer and a complete borrower response package; make and communicate final decisions to the borrower within 60 calendar days of receipt of the offer and complete borrower response package.

The new guidelines will go into effect for new short sale evaluations conducted on or after June 15, 2012, but servicers are encouraged to implement these guidelines sooner.

Nearly One in Four Homes in Foreclosure Process Q4 2011

During the fourth quarter, 24 percent of U.S. homes sold were in some stage of foreclosure, either already bank-owned or already winding through the process, according to RealtyTrac, a company that sells foreclosure data. The number is slightly down compared to Q4 2010 when foreclosures accounted for 26 percent of all home sales.

Lenders Beginning to Favor Short Sales

Apparently banks have finally woken up and smelled the coffee.

Banks are now more willing to agree to a sale at a lower cost than a homeowner’s mortgage balance in order to avoid having to foreclose on a property, a process that can be more costly for a lender.

In the fourth quarter of 2011, there were more than 88,000 short sales in the United States, a rise of 15 percent compared to a year prior, according to data release by Realty Trac, a publisher of foreclosure data. In total, short sales made up 10 percent of all U.S. home sales sold in the fourth quarter.

On the other hand, bank-owned home sales dropped 12 percent year-over-year (to 116,000), making up 13 percent of all home sales during the fourth quarter.

In the U.S., the average short sale in the fourth quarter sold for $184,221. The average foreclosure sold for $149,686; however, at least in Massachusetts, foreclosures tend to need more repairs, in part, because the properties are vacant for so long.

One in Eight Home Loans Delinquent or in Foreclosure

Nationwide, 12.6 percent of home loans were delinquent (at least one payment past due) or already in foreclosure at the end of the third quarter, according to the Mortgage Bankers Association.

That equates to more than 6 million distressed homes; however, not every home loan that is delinquent will end up in foreclosure. In fact, the number of delinquent home loans declined by nearly 8 percent in the third quarter.

In October 2011, foreclosed or short-sale homes made up 28 percent of U.S. existing home sales, the National Association of Realtors recently reported.

Find Foreclosed and Short-sale Home Listings In Massachusetts

Are More Short Sales Expected in Massachusetts?

Nearly a quarter-million homes have negative equity in Massachusetts, a number that has grown roughly 5 percent over the past year, the Boston Business Journal reported Tuesday, September 13, 2011.

A home is considered “underwater” when its mortgage exceeds the property’s overall value. Although the percentage of Massachusetts homes that are underwater is quite a bit lower than the national average (15.7 percent in MA, 22.5 percent nationally), Corelogic, a provider of financial, property and consumer information, reported that Bay State percentages are trending upwards while the national average declines.

The negative equity could end up forcing a lot of homeowners that must move, for jobs, divorce or other personal reasons, to list their home as a short sale. Failing to get lender approval for a short sale could lead to foreclosure. 

As of the end of June, 15.7 percent of Massachusetts homes were underwater compared to 14.9 percent at the third quarter 2010, a difference of 11,846 homes (234,443 in June 2011, 222.599 in September 2010).  The Boston-Quincy metro region saw negative equity rates rise from 15.7 percent in September 2010 to 16 percent in June 2011.

Nationally, negative equity rates dropped to 22.5 percent in June, down from 23.1 percent at the end of 2010.