Program Will Pay Homeowners to Sell at a Loss Options

[MTP Reggie]

Program Will Pay Homeowners to Sell at a Loss
By DAVID STREITFELD
Published: March 7, 2010
nytimes.com

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In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave. This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done. For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser. The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around. Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

(snip)

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(Emphasis, mine... (IMG:http://www.rightnation.us/forums/style_emoticons/default/dry.gif) )












This post has been edited by MTP Reggie: Mar 8 2010, 07:11 AM

[bearded old man]

So the bank gets $1000 to cover it's $102,000 loss and the homeowner gets $1500 for not paying his mortgage....I guess that's considered fair in Obama circles.
I'm also surprised that they don't forgive the taxes the homeowner will owe the IRS on the forgiven $102,000 that will be considered income.

This post has been edited by bearded old man: Mar 8 2010, 07:59 AM

[PDshooter]

So the bank gets $1000 to cover it's $102,000 loss and the homeowner gets $1500 for not paying his mortgage....I guess that's considered fair in Obama circles.
I'm also surprised that they don't forgive the taxes the homeowner will owe the IRS on the forgiven $102,000 that will be considered income.

Oops! That damned "Law of unintended consequences" rears it's ugly head again.

Maybe it's no coincidence that the IRS is buying those tricked out Remington 870s.. (IMG:http://www.rightnation.us/forums/style_emoticons/default/ohmy.gif)

[johnnybravo]

They aren't paying the "homeowners" to sell at a loss, they are paying the scum to walk out and forcing the bank to sell at a loss.

Money quote from the article:
"Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed."


The money the bank will get from the government won't even be enough to cover legal expenses not to mention all of the months of unpaid debt service and default interest that the bank had to front. This administration is trying it's damnedest to put us into a depression with all of the artificial flooring they putting the market through (with printed money, btw).

[leftcoast, right...]

Ain't communism great? You reward people for making mistakes so that they can go out and make the same mistake again! And guess who gets shafted and stuck with paying for these magnanimous programs?

[oki]

Typical Obama, ain't no problem that money can't fix.
Problem is it ain't his money he is spending.

Oki

[Noclevermoniker]

Dis gwan be a big hit in de communiteh.

[evil monkey]

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave. This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

(IMG:http://www.rightnation.us/forums/style_emoticons/default/dry.gif) Yes, because letting the market run its course isn't a solution. The government Not Doing Anything isn't a solution.

Further evidence that they hate the free market, and are trying to destroy it.