The Home Affordable Modification Program (HAMP) is designed to help homeowners in states where home prices have fallen at least 20% statewide.  The five identified states are: Arizona, Nevada, California, Michigan, and Florida.  All of these markets have notoriously taken a big hit in the past few years due to previous rapid appreciation, speculation, and the weak economy.

Obama has blamed irresponsible lending practices for much of the problems, and is trying to make sure that the money is properly spent by state and local finance agencies. A very specific application process for lending institutions has been designed to create oversight for the program.

The program seeks to aid troubled homeowners by modifying their mortgage and lower their monthly interest rates through participating lenders. The lender then lowers the interest rate, and the feds provides subsidies to the lender and borrower. According to Herb Allison, assistant secretary of the Treasury for Financial Stability, the program should help approximately 3 to 4 million Americans before it terminates at the end of 2012. Currently, about 1 million homeowners have had their mortgages amended due to the plan.

Unfortunately, New Mexico isn’t currently part of the program, which does cause some concern.  Sure, our home prices haven’t dropped as a whole by 20%, but unemployment is high, and many homeowners are teetering on the edge of default. As with all governmental programs, this one may be ammended to fit more states, particularly if the money isn’t being spent in the currently eligible states.  Time will tell.

Contact Matt Desmond and Ryan Bolton

New Mexico has two of the top retirement spots in the US- Santa Fe and Las Cruces. Perhaps this is helping to stabilize our Real Estate Market.

 Boomers are willing to move farther than previous generations when they retire, and they are choosing places unlike stereotypical retirement hotspots, says Tom Brokaw in his report on Boomer retirement, airing on CNBC, Thursday, March 4 at 9 p.m. ET

The top places listed by AARP and explored on the show are:

1. Loveland/Fort Collins, Colo.
2. Las Cruces, N.M
3. Rehoboth Beach, Del.
4. Portland, Ore.
5. Greenville, S.C.
6. Sarasota, Fla.
7. Ann Arbor, Mich.
8. Tucson, Ariz.
9. Montpelier, Vt.
10. Honolulu
11. Santa Fe, N.M
12. Atlanta
13. Charleston, S.C
14. Northampton, Mass.
15. San Diego, Calif.

Source: CNBC, Paul Toscano (02/05/2010)

Foreclosures hit hard but less so in N.M.
By | The Associated Press

2/11/2010

The number of U.S. households facing foreclosure in January increased 15 percent from the same month last year, and a surge in cash-strapped homeowners who’ve fallen behind on mortgages could be on the way.

More than 315,000 households received a foreclosure-related notice in January, RealtyTrac Inc. reported Thursday. That number is down nearly 10 percent from 349,000 in December, which saw the third highest total since the company began tracking foreclosure data in 2005.

There were 107 foreclosures in Santa Fe County in January, according to RealtyTrac, most of them (33) in the 87507 Zip Code. That was followed by the 87505 Zip Code, where there were 22.

Santa Fe’s foreclosure rates for January 2009 were not included in RealtyTrac’s report, precluding a comparison with 2010′s rates. RealtyTrac’s data specialist could not be reached.

In New Mexico there were 1,281 new foreclosure filings and nine foreclosure sales, according to RealtyTrac. The average sales price of foreclosed homes in January was $208,841.

The rate of foreclosures in New Mexico remains low. In his most recent newsletter, Santa Fe title company executive Alan Ball said foreclosures in states such as California and Florida exceeded 400,000 last year.

In New Mexico, by contrast, there were just over 7,000 foreclosures.

Ball also said that Santa Fe real estate sales in January were up 58 percent from the same month last year.

“We have already thanked the first-time homebuyer tax credit law and can certainly do so again” for the increase in home sales, Ball said. “Does that account for the increase? That is difficult to say.”

In January, one in 409 homes across the country were sent a filing, which includes default notices, scheduled foreclosure auctions and bank repossessions. Banks repossessed more than 87,000 homes last month, down 5 percent from December but still up 31 percent from January 2009.

January marked the 11th straight month with more than 300,000 properties receiving a foreclosure filing. The numbers could stay above that level as unemployed homeowners who have tried to keep up with their mortgages finally start missing monthly payments.

Mortgage financier Fannie Mae reported in late January that the rate of borrowers who have a conventional loan on a house and are seriously delinquent was 5.29 percent in November, more than doubling the rate of 2.13 percent in November 2008. Borrowers are considered seriously delinquent if they are past due by three months or more, or are in foreclosure.

“There’s a lot of foreclosures in the pipeline, and the number is going to continue to get bigger,” said Patrick Newport, an economist with IHS Global Insight.

Last month’s foreclosure activity followed a pattern similar to that of a year ago, when a double-digit percentage increase in December was followed by a 10 percent drop in January.

The dip in January’s numbers may be due to processing delays by lenders during the end-of-year holidays, said Rick Sharga, senior vice president of RealtyTrac, which is based in Irvine, Calif.

“I don’t think it’s an early sign of the coming of the end of the foreclosure crisis,” Sharga said.

A record 2.8 million households were threatened with foreclosure last year, and the numbers are expected to rise to between 3 and 3.5 million homes this year, RealtyTrac said.

Slowing the foreclosure rate is a key step in the recovery of the real estate market and the overall economy. The foreclosure crisis forced the federal government and several states to come up with plans to prevent or delay the process to help delinquent borrowers.

Foreclosed homes are usually sold at steep discounts, so they often lower the value of surrounding properties. Cities lose property tax dollars from foreclosure homes that sit empty and from declining home values, straining local economies. Home prices have stabilized in some cities, but are still down 30 percent nationally from mid-2006.

Economic issues, such as unemployment or reduced income, are expected to be the main catalysts for foreclosures this year. Initially, subprime mortgages were mostly the culprit, but homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

Among states, Nevada posted the nation’s highest foreclosure rate, followed by Arizona, California, Florida and Utah. Rounding out the top 10 were Idaho, Michigan, Illinois, Oregon and Georgia.

The metro area with the highest foreclosure rate in January was Las Vegas, with one in every 82 homes receiving a foreclosure filing. It was followed by Phoenix and the California cities of Modesto, Stockton, and Riverside-San Bernardino-Ontario.

The New Mexican contributed to this story.

Here is a link to the Original Story

Real estate loans strike at banks’ bottom lineLos Alamos National Bank chief sees values stabilizing, buyers emerging
Bob Quick | The New Mexican
Posted: Tuesday, February 02, 2010          

Los Alamos National Bank, the largest bank in Northern New Mexico, may have suffered setbacks in the real estate market, but bank chief executive officer William C. “Bill” Enloe is confident things maybe looking up.

“Our income (in 2009) was down, which was due to larger than normal transfers for bad debts,” he said. “We’re experiencing everything every other bank is, which is more loans with problems. That affects our income.”

Los Alamos Bank has $1.87 billion in assets. That compares with $719 million for First National Bank of Santa Fe and $499 million for Century Bank.

LANB’s most recent call (quarterly) report indicates LANB’s income for the year was only $10.8 million after the bank wrote off $24 million in nonperforming loans.

“We felt very fortunate that we had income,” Enloe said. “Our peer group average was a loss of 0.4 percent. We were certainly below expectations, which was disappointing, but it was encouraging we have been able to address the issue.”

Enloe doesn’t think the bank’s expansion, the newest branch is on Cerrillos Road in Santa Fe, is bad for the bottom line. He said the three branches now form a triangle that covers all of Santa Fe “pretty well.”

In a news release, Enloe said although values have begun to stabilize and buyers to emerge, “we remain concerned about how general economic conditions in the nation and in New Mexico have affected and potentially could affect our customers and markets, and we have taken measures to properly manage these risks.”

Those measures included doubling the bank’s provision for loan losses and bringing in a federal regulator, the Office of the Comptroller of the Currency, to work with the bank on its problem loans.

In a FDIC report, the bank’s ratio of equity capital to assets was 9.61 percent. Banks like to keep that number at 10 percent.

The call report indicated LANB added $30.4 million in loans on nonaccrual status during the past quarter.

Enloe sees that trend slowing down. “It peaked around August of last year,” he said. “Since then our substandard loans have decreased 20 percent, but it is still at a much higher level than we consider normal.”

The problem loans are primarily residential real estate loans on properties in Albuquerque and Santa Fe, Enloe said.

Despite the tough times, the bank has maintained a staffing level of 316 people, Enloe said.

Enloe added that the bank’s pre-reserve earnings were “very strong” and that the bank has “a lot of equity.”

As of Dec. 31, 2008, LANB had equity capital of $121 million, the call report indicates. That amount came to $153.1 million by Dec. 31, 2009, an amount bolstered by an injection from LANB’s holding company, Trinity Capital Corp., of $35 million.

Trinity Capital also received $35.5 million in funds from the federal Troubled Asset Relief program, Enloe said, adding that the bank is in no rush to pay the money back.

“We don’t have the incentive the large banks do to return the money,” he said.

LANB has a rating of 3.5 stars, or “good,” by Bauer Financial Ratings, a bank analyst. Bauer’s highest ranking, five stars, is “superior.”

Trinity Capital has about 3,000 shareholders, 8.5 percent of them members of an employee stock ownership program.

On Monday, Los Alamos National Bank announced that it had entered into an agreement with the Office of the Comptroller of the Currency, its primary regulator, “to further solidify our financial soundness against the uncertain consequences of a deep recession,” a statement said.

The agreement came after an on-site examination of the bank by the OCC and is intended to reduce the bank’s classified loans and reduce its loan concentration in commercial real estate.

“The bank has made measurable progress in addressing the requirements to date, including an approximate 18 percent decrease in classified loans since June 30, 2009,” the statement said. “The bank already has programs in place addressing most of the provisions of the agreement.”

According to the statement, LANB still enjoys a “well-capitalized status” and remains “strongly capitalized,” with more than $252 million in liquid funds. The bank also has an additional $8.5 million in reserves for loan losses not included in capital.

Another bank with a large presence in Santa Fe, First State Bancorporation, parent company of First Community Bank, has reported a loss of $28.4 million in the fourth quarter of 2009. For the year, First State reported a net loss of $110.5 million.

“The net loss for the quarter and year ended Dec. 31, 2009, resulted primarily from the significant provision for loan losses due to the level of non-performing assets and charge-offs and write downs of other real estate owned,” said H. Patrick Dee, president and chief executive officer of First State, in a statement.

The pain may not be over yet.

“While overall classified loans remained stable for the second straight quarter,” he added, “we experienced another increase in non-performing loans,” Dee added.

Here is a link to the original article.

When you are ready to Buy or Sell, contact us.

This article was just posted on the New mexican website. Though none of us have a crystal ball, the statistics certainly give us some good insight.  We can say with certainity that Sales are picking up, and prices have gone down. For more details please contact us

Santa Fe real-estate market may stabilize as 4th quarter prices declined

Bruce Krasnow | The New Mexican
 The best news Santa Fe Realtors have about 2009 is that it’s over.

The 4th quarter median price for homes sold in the city and county declined 9 percent to $335,000. But, buoyed by a federal tax credit, the number of homes sold increased from a year ago by 16 percent to 274 in October, November and December. Still, the sales were less than half what they were in 2005, the peak sales year of the past decade.

In addition, the number of housing starts in the city of Santa Fe hit a 40 year low with 180 permits in 2009. Reed Liming, a planner with the city, said one has to go back to 1969 before new home construction starts were at that level.

Finally, the number of agents who renewed their membership to the Santa Fe Association of Realtors declined 15 percent to 795 as of this month, said Lois Sury, the new association president, and the group has trimmed its budget to adjust.

Sury said the nation has gone through a historic economic downturn, “One I’d rather read about in history books than live through again. ” The housing market in Santa Fe has adjusted, she said at the quarterly breakfast meeting Wednesday where the statistics were released.’

She said the final sales price of a home was at 93 percent of the listing at the end of 2009, up from 80 percent a year ago — and that shows sellers have adjusted their expectations.

“Affordability continues to improve, with more sales at the lower end of the market affecting the overall median price of homes,” she said.

Jane Trusty, an appraiser at the breakfast, called the first half of 2009 difficult, and with sluggish sales it was often hard to find comparable homes for valuation.

“We’re breathing quite a sigh of relief,” she said. “What we found in the last two quarters is that things have stabilized quite a bit,” Trusty said.

The first half of 2009 saw stability in median sales prices — but agents say many homes were not being sold because sellers were not prepared for lower offers.

That was not the case in the third quarter, which saw a 20 percent decline in the median sold price. The just-ended quarter saw the median sold price in the unincorporated area drop 18 percent to $350,000. Prices of sold homes in the city of Santa Fe fell 6 percent to $329,500.

“Prices have reset,” said Sury

Many sales under $500,000 are a result of the federal tax credit that has been expended under the economic stimulus plan. The credit is now open to existing homeowners who want to move up or downsize — but homes must be under contract by April 30 to receive the credit, $8,000 for new buyers and $6,500 for repeat buyers.

And it’s not just for move-up buyers. Sury is seeing long-time homeowners who want to downsize take advantage of the program to purchase something smaller, she said.

“It’s your tax money,” she said. “You might as well use it.”

Gary Miller a mortgage specialist with Century Bank, said there is an upward trend in mortgage interest rates from Wednesday’s average of 5.2 percent on a 30-year fixed rate loan. That means the first three months of 2010 brings a convergence of low prices, low borrowing costs and the tax credit. He tells potential buyers that it won’t last.

“It’s important to take action now,” he said.

Our first post is a video tour of our fabulous listing located at 7 Vista Calabasas.  Here is the property description and a link to the post:

Rancho Calabasas; an immaculate, private, & unrestricted compound consisting of a main house, 2 guest houses, & your own private spa! An ideal property for a family compound or retreat. Perfect for entertaining w/separate guest suites for family or staff. Lushly landscaped grounds, a stream, waterfall, & Koi pond, & multiple outdoor entertainment areas, all on 5 filled acres. This Santa Fe oasis can be available turn-key including art, bronze sculptures, antique wagons, & furniture.

Check It Out Here!

We are very excited about our new youtube page, and we look forward to posting on it regularly.  As a HomesinSantaFeNM.com user, you will always find links to our youtube posts on the website, but you can also find them directly on youtube. Thanks for checking it out.

Contact Ryan and Matt

Most of Santa Fe’s Realtors will tell you that historically January and February have been the quietest months of the year. However, 2010 has started out well for us. 

I also remember that in 2006 that we started the year off with about 12 million worth of property under contract in January.

With interest rates at historic lows, the homes buyer tax credits, and prices at or near the bottom, we choose to be optimistic about 2010.

Bruce Krasnow | The New Mexican

 When Realtor Lois Sury went to buy her first home in Santa Fe some time ago, there were about five houses in her price range and she was competing against other buyers. That “hyper market,” as she called it, was not good for consumers, who had few choices to consider and a heavy burden to overcome to get into a first home.

Those days are gone in Santa Fe, perhaps for a long time. Market data indicate that the number of residential home sales in 2009 was at the lowest point in decades, in terms of the number of transactions and the price volume of those sales.

The statistics have been compiled by Alan Ball, a title agent who publishes a monthly newsletter on the Santa Fe real estate market. They show that the real estate meltdown is more about the industry and Santa Fe’s economy than the habits or wishes of individual homeowners.

Median prices for instance, have held up considerably well in Santa Fe, starting in 2001 at $296,000 and ending in 2009 at $447,000. That’s a more than 50 percent jump.

But the total dollar amount of residential sales shows that volume peaked at $1.2 billion in 2004-05, then tumbled to $540 million in the year just ended, a decline of 56 percent. The dollar volume of all sales in 2009 was even less than the $578 million generated nine years ago.

“That’s money not circulating in the community,” Ball said. “If you look at local Realtors, lenders, surveyors, appraisers, insurance agents — if you just start piling up all the things that directly relate to the sale of a home — it’s money not changing hands. And that affects anybody that sells goods or services. There’s less discretionary income.”

In terms of charting sales numbers, the last nine years shape a modified bell curve. Total residential sales in 2001 ended at 1,955. They climbed to 2,800 in 2005, but by 2009 had tumbled to 1,200 — significantly less than the number at the start of the decade, Ball said.

But turn over a troubling bell curve, and you get a smiley face. Ball and others see opportunity in that option.

Michael Halsey, an economic consultant and owner of Business Futures, said Santa Fe’s housing market has always been unsustainable, like an upside-down pyramid, and now there is a chance to right the foundation.

Everywhere else, communities build housing from the bottom up, with young or first-time buyers getting into less expensive homes and trading up as needed for more amenities or space. And there should be more less expensive homes being built than luxury properties.

Not so in Santa Fe, Halsey said, where the market for luxuries and second homes had long been driving the construction market. Craftsmen, builders, architects — and the labor they hired — were so busy with new high-end products, there was nothing else being built. The result was a small selection of homes for people living and working in Santa Fe who could not afford million-dollar and up houses.

“The community was supporting an industry that I felt was top-heavy as far as top-end products,” he said. “We are just now starting to fulfill the demand for entry-level housing, that hasn’t been met in past years.”

Halsey cited the more affordable new homes in Rancho Viejo as an example of how the market has adjusted. The houses are being constructed with basic finishes, but leave room for expansion and upgrades as families need them. The cost of new construction, Halsey said, has dropped in Santa Fe about 20 percent.

Sury, president of the Santa Fe Association of Realtors, said the homebuyer tax credit is already helping to expand the pyramid and is bringing out new buyers who, in the future, can trade up as their homes increase in value. A whole new generation of Santa Fe residents have a chance to get on the escalator of home appreciation, she said.

And though it’s been a slow year for sales, Sury said consumers are far more confident now than a year ago, when the stock market crashed and financial institutions were failing.

“At this time last year we were in a much worse situation than we are now. It was much bleaker. Consumers seem to have more confidence now,” she said.

Adding to the confidence is the fact that the federal tax credit for home purchases has been extended until mid-2010 and is also available to repeat buyers who want to move. In Santa Fe there are now plenty of affordable homes all over the city and not just in certain neighborhoods.

“Five years ago, we were seeing multiple offers and homes under contract in two or three days. Buyers had little or no power,” Ball said. “Now we’re seeing more balance on the lower end.”

There needs to be a solid year of sales and price gains before anyone can call an end to the housing recession. But people still want to move to Santa Fe, and many people already here want to move to a different house or change neighborhoods, he added.

“I cannot escape the attraction Santa Fe has for so many people, Ball said. “We’re going to warm up faster than other markets. I don’t know if we’re out of this thing or not, but there are promising signs.”

The National Association of Home Builders has information about the homebuyers tax credit at federalhousingtaxcredit.com.

Despite significantly lower traffic and sales this month, Southern California retained pricing strength and the majority of surveyed builders expect revenues to increase in 2010, according to John Burns Real Estate Consulting’s December survey of home builders.

“At this point, it’s clear that the extension and expansion of the tax credit weren’t enough to drive demand through the seasonally slow time of the year,” said Jody Kahn, a vice president with the firm. “This month’s survey results, backed by numerous channel checks and our Consulting team’s work in the market, confirm that buyers feel little urgency to buy homes today, and probably won’t until the tax credit expiration nears next Spring.”

This month’s survey consists of 264 home building industry executives from public and private companies. In total, their insight is reflective of on-the-ground conditions in 93 MSAs and 2,000+ communities.

Also of interest, 57% of respondents reported that they are planning for more revenue in 2010 than 2009, driven by increased community count, better orders and slightly higher prices. The most optimism came from the Northeast, Southwest, Texas and Southern California. “If they are correct, and we believe they are, the trough for this cycle was 2009 for single-family starts, new home sales and new home prices,” said CEO John Burns. “That being said, the continued shift to smaller, simpler homes may drive the headline new home price down a bit, and the recovery will be slowed by rising distressed sales.

Conditions are likely to vary dramatically by submarket and price point, which we have addressed in our Land Acquisition and New Home Strategy report for 23 MSAs.”

Additional survey highlights include:

-Average net sales per community declined to 1.4 nationally from 1.6 last month, and from a recent high of 2.0 in September. Only the Southern Florida and Southeast regions reported increased net sales per community, while the Southern California, Midwest and Northern Florida regions reported flat net sales rates.

-The average unsold, finished inventory per community increased to 3.3 units, rising from a recent low of 2.8 units. We believe the rise is explained by aggressive speculative starts by a few builders who are betting on strong sales in the Spring. In addition, higher cancellations during November from sales that did not close within the original tax credit deadline were reported.

Originally scheduled to expire Nov. 30, the first-time homebuyer tax credit has been extended until April 2010 and homebuyers will have until July 1 to close as long as the purchase contract is in effect on April 30. A new $6,500 tax credit is now available to existing homeowners wanting to buy.

Eligible homeowners must have used the home being sold as a principal resident consecutively for five of the previous eight years with a price limitation on the new purchase of $800,000. Income limits have also been increased to $225,000 for married homebuyers and $125,000 for individual (single) buyers. Buyers in Santa Fe can take advantage of this opportunity to purchase a larger home for their growing families, other desired home amenities, or simply downsize.

On the home front, Santa Fe home sales are trending up throughout 2010 and October single-family home sales topped over 100 for this first time this year. Condo and townhome sales remained flat in September and October, likely due to the fact that affordability continues to improve for single-family homes. Lower prices may also bring some international buyers wanting to scoop up Santa Fe homes while the value of the dollar is still hitting record lows. This may explain why France was listed as one of the top 10 states/countries searching for homes online here in Santa Fe. With the help of a new service to the Association of Realtors, participating brokerages can track the top 10 states/countries for online visits to Santa Fe area listings. Realtors, Sellers … parlez-vous français?

To help get more Santa Feans in homes, the County of Santa Fe has recently established several pilot programs designed to increase work force housing and help county workers purchase a home. On Nov. 17, the County Commission voted unanimously to earmark $500,000 to support three affordable-housing programs.

The most unique of the three will initiate a developer subsidy of up to $10,000 per unit to defray the cost of infrastructure when building affordable housing. A down-payment assistance program for county employees will be created and the ordinance will permit the county to donate land or buildings for conversion to affordable housing. Administrative policies are being crafted by county staff to support these new affordable housing initiatives.

Donna Reynolds For The New Mexican

Information provided by the
Santa Fe Association of Realtors®, www.sfar.com.

ARTICLE:

Nationwide housing production rose 8.9% to a seasonally adjusted annual rate of 574,000 units in November 2009, according to figures released by the U.S. Commerce Department. The gain represented a partial bounce-back from an exceptionally slow month for housing activity in October, and was largely attributed to a big increase on the multifamily side.

“The fact that both starts and permits for new housing production rose last month is a good sign that we’re headed in the right direction, albeit slowly, on the road to a housing recovery,” said Joe Robson, chairman of the National Association of Home Builders (NAHB) and a home builder from Tulsa, Okla. “That said, the November improvement was primarily on the multifamily side, and poor job markets and other economic factors are still keeping many potential buyers on the fence for the time being.”

“Home builders remain very cautious about starting new homes, and overall housing production is still down on a three-month average basis,” noted NAHB Chief Economist David Crowe. “Understandably, it will take some time for the newly extended and expanded home buyer tax credit to start boosting sales in individual markets–just as it did the last time such an incentive was enacted. However, the fact that permits increased in November is a hopeful indication that the desired impact of the tax credit on housing demand may be forthcoming early in 2010. In the meantime, credit for new housing production remains extremely difficult to come by, posing significant obstacles to builders with viable projects.”

Single-family housing starts made up some of the ground they lost in October, posting a modest 2.1% gain to a seasonally adjusted annual rate of 482,000 units in November. Meanwhile, multifamily starts rebounded from an all-time record low in the previous month with a 67.3% gain to a seasonally adjusted annual rate of 92,000 units in November.

Gains in housing production were registered across all regions of the country in November, with a 16.4% increase in the Northeast, a 3% gain in the Midwest, a 12.3% increase in the South and a nearly 2% gain in the West.

Permit issuance, which can be an indicator of future building activity, rose 6% in November to a seasonally adjusted annual rate of 584,000 units, its highest level in a year. Single-family permits rose 5.3% to 473,000 units, while multifamily permits rose 8.8% to 111,000 units.

Three out of four regions posted gains in housing permits for November, with a 4.7% increase reported in the Northeast, a 10.7% increase posted in the South, and a 2.7% gain registered in the West. The Midwest posted a 1.9% decline.

ARTICLE:

A government-incentivized program that acknowledges that not all homeowners are able to afford and keep their homes is intended to expedite the short sale process.

 “The push right now is for servicers to avoid foreclosure and the push is coming not only from The Obama administration and the Treasury but also from the owners of the loans such as Fannie Mae and Freddie Mac. And the focus right now is on short sales. So, I think in 2010, you’re going to see a lot more short sales and hopefully reduced foreclosures,” says Travis Hamel Olsen, chief operating officer of Loan Resolution Corporation.

Guidelines issued earlier this month for the $75 billion housing plan include the potential for banks to get government incentive payments in cases where borrowers are allowed to sell their home at a loss, bypassing the foreclosure process.

“Essentially the way the program works is borrowers will have to go through the Home Affordable Modification Program (HAMP) and be denied and then they will be eligible to participate in the short sale plan which is called Home Affordability Foreclosure Assistance (HAFA),” explains Olsen.

Calculators are available at MakingHomeAffordable.gov to help you see how much of a mortgage modification you might qualify for as well as answer some typical questions that homeowners have regarding modifications.

If, however, a modification isn’t possible, Olsen says that’s when this latest government move may play a role.

“If the short sale is completed then the borrower [homeowner] can receive up to $1500 in relocation assistance and the servicers can get up to $1000 compensation,” says Olsen.

“I think it’s a big step in the right direction,” However, he says the success of the program is dependent on the buy-in of the subordinate (second-mortgage) lien holders.

“You have a primary lien holder and they’ll love this program because the servicers will get paid an additional $1000 for completing the short sales. On the other hand, you have all the subordinate lien holders in a short sale who also need to give their approval for the short sale in order for it to happen. The problem, though, is that the subordinate lien holders are the ones that are getting totally wiped out and under the program they would receive $3000 for their lien and in exchange they would have to write off the remaining balance of the loan and give up any rights that they would normally have to pursue the borrower thereafter for the remaining balance,” says Olsen.

Olsen’s company works with mortgage servicers and institutional investors to handle and expedite the short sale process. He says about one in five homeowners is underwater (owing more on their mortgage than their home is worth).

“The traditional timeline out there is anywhere from 60 days to six months to get an approval. Ours is typically around 15 days,” says Olsen.

He says the new guidelines may help troubled homeowners get out from under faster and get their lives back on track.

“With the short sale closed, [homeowners] can move on with their lives a lot faster. From the real estate agents’ point of view, they spend less time doing short sales and then can go about getting other listings and making more money, and from the banks’ point of view, they’re happy because the volume of short sales that they have going on decreases because we’re resolving so many more so much faster,” says Olsen.

In the end, Olsen says, if you need out of your mortgage a short sale far outweighs a foreclosure. “From the homeowners’ point of view, they have reduced credit damage as compared to a foreclosure. On the flip side, for Fannie Mae or any investor of the loan, their losses are reduced. So they want to avoid the foreclosure and the Real Estate Owned (REO) at all costs and so they incentivize homeowners to do the short sale by reducing the credit damage to homeowners’ credit.”

According to the National Association of Realtors, approximately one in 10 homes sales this year was a short sale.

by Phoebe Chongchua