Last year the Obama administration started two new programs to help prevent foreclosures. The purpose is to crack down on two of the more difficult issues in foreclosure. Neither program has had much of an impact, according to data released Friday by the Treasury Department.
One was designed to help home owners modify second mortgages. The second is meant to help home owners get through the complicated and difficult process of apply for a short sale with their mortgage company. The short sale process has notoriously been long and difficult to apply for. In a short sale, a bank agrees to allow the homeowner to sell their home for less than the remaining balance on the mortgage. In exchange, the bank agrees to discharge the remaining debt. This allows the mortgage company to avoid foreclosure and the buyer gets a discounted price on a property.
The United States Treasury says that only 17,000 homeowners have received loan modifications of second mortgages through the federal program even though 17 different mortgage companies have signed up for the program. Compare that amount with 557,000 homeowners that have received permanent loan modifications of their mortgages through February with the federal Home Affordable Modification Program. Second mortgages are lagging in modifications. Why? It is not in the best interests of the banks to modify these second loans. While most first mortgages are held by the government-controlled companies such as Fannie Mae and Freddie Mac, banks hold most of the seconds and other lien mortgages. They have been reluctant to write off second mortgages because most homeowners are still on time making payments. It is not in the banks best financial interests to refinance these loans.
Real estate agents and brokers have often complained about the long process required to get banks to agree to short sales. The process includes the owner proving that they are in a dire financial sitation and are unable to make their payments. It also includes a long waiting period with little or no communication from the mortgage holder. This long process often results in buyers backing out and purchasing another home. This long process meant there was high hopes when the short-sale program launched last year.
As of this year, only about 10,000 homeowners nation wide have begun the short-sale program, which supposed to consider short sales for borrowers who would not have been eligible before. Only 4,500 homeowners have completed the program, which means most are falling through. Those homes are most likely ending up in foreclosure.
While the government offers incentives to mortgage holders, short sales are still lagging as an option to avoid foreclosure. If you are behind on your mortgage payments and think you may be at risk of foreclosure, you need to contact a Miami foreclosure lawyer to see determine your options. Short sale maybe a viable option for you, but only a Miami bankruptcy attorney can advise you on your options.
Efforts Targeting Short Sales, Second Mortgages Fall Flat. By Alan Zibel and Andrew Ackerman