Thursday, January 15, 2009

Gov Bailout

Today the Senate gave the OK to release the bailout funds as requested by Barrack Obama two days ago.
Looks like the Senate are on Barracks side already.

But the question remains the same; even after a $350 Billion dollar pay out nothing has changed in the housing market, so where is the money going.

Banks are being told repeatedly to ' start lending' but up until now still nothing, in fact it seems harder than ever to get a loan even for people who have money.

We recently had a client who was buying a $2.9 mil dollar home with a credit score of 825 and a down payment of $1 mil and the loan was declined.

PMI companies are hemorrhaging and no longer want to insure mortgage loans.
Mean while lenders are not doing themselves any favors by refusing to do short sales ( where a lender takes less than what is owed to satisfy the mortgage) and taking houses to foreclosure sale.
This makes no sense at all. firstly it costs the lender/investor over 70-80k to do a foreclosure, then when it goes to the sale they need to foreclose on the amount that is owed.
i.e If the lender is owed $400k for a property but the real value now is only $280k the lender must foreclose on the $400, which doesn't make sense since there will be no third party bidders willing to pay $400k for a house that is worth $280k.
So the lender takes the house back into REO ( real estate owned) and they try to sell it on the open market
this is where the lenders need their heads looked at. The short sale offer would probably be in the region of $260-$270k.
They could have saved themselves the hassle of foreclosure, stopped the bleeding on the loss and prevented the homeowner having a foreclosure on their credit.
Now they have an over leveraged property that no one wants, the homeowner is homeless and credit destroyed, and they have still lost money.
And the painful thing is they will try and sell it at the $260-$280k level... where is the sense.

If the 'People' are bailing out these banks they need to be held accountable and foreclosing properties when there is an alternative is no longer acceptable.

We need a body to over see the banks are making the right decisions for everyone and not themselves as usual.

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