In the spirit of Jerry McGuire, "Help me help you!", let me offer a new perspective, the BGS3 perspective.  The Wall Street Journal reported that one is six homeowners owes more on a mortgage than what the home is worth.  http://online.wsj.com/article/SB122341352084512611.html   Put another way, nearly 12,000,000 households are facing potential default or foreclosure.  In many markets, this number is very optimistic.  No homeowner should experience foreclosure.  Through the efforts of BGS3 and great Realtor partners, many of these homeowners are being helped... at no charge whatsoever.

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, DC, reports on this statistic from an insider's perspective.  He claims bank losses on these mortgages will continue for a long time and that short sales will number in the millions.  Estimates from Baker have short sales accumulating between $125B and $500B in bank losses.

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=10&year=2008&base_name=almost_one_in_six_homeowners_u  

I have blogged about the specific benefits for a homeowner to short sale as an alternative to foreclosure. The National Mortgage News covered the efforts of BGS3 relating to this topic in their September 8th, 2008 publication with the article, "BGS3 Lessens Damage to Borrowers Through Short Sales". With the continued dreary outlook of our economy, more Realtors are beginning to understand that by helping homeowners avoid foreclosure they are helping themselves too.  Are you doing your part...and at a volume level yet?

This morning I read Millions at Risk of Foreclosure Fraud and was dismayed by some of the inaccuracies in the article.   I agree with the author, especially with the need to draw attention to the growth of foreclosure scams, but the article sours when he relies on the information from his experts to be accurate and credible.  The glass is not always half empty. Where is the mention that there are companies with integrity, dealing with short sales as an alternative to foreclosure?  I am biased of course, but one would think that a company like BGS3, which is currently processing nearly $250M in short sales and helping thousands of homeowners, would be questioned about their system and how their services are entirely free to the homeowner.
 
So where were we misinformed?  It was suggested that it is against the law for foreclosure rescue companies to negotiate with banks on behalf of the consumer.  Not entirely true!  I have attached a link to one financial institution's website where a form authorizing a third-party to negotiate on their behalf is downloadable.   https://www.myauroraloan.com/docs/Authorization_Form.pdf I could list dozens of links or contacts of where to access these authorization forms but this is why our Realtor partners turn to BGS3 for help in processing their short sales; we simply get them done.
 
It was also suggested that a short sale is considered as bad, by the credit scoring system, as a foreclosure. Not entirely true!  I have attached additional links to explain.  www.program3648.org   http://activerain.com/blogsview/699668/BGS3-Clears-up-Common  Even if the impact on a FICO score is the same temporarily, the most important factor a homeowner is concerned about is how soon they will be credit worthy for homeownership again. Fannie Mae has made it clear that the guidelines and timelines for underwriting after a short sale are far more favorable than after a foreclosure or deed-in-lieu.
  
At BGS3 we do our best to be current on the facts facing our industry.  Additional information is available at www.bgs3.com or www.program3648.org.
 

Unfortunately, there are increasing numbers of homeowners that are unable to make their mortgage payments on time. If the mortgage payments continue to fall behind, and the homeowner owes more money than the house is actually worth, the foreclosure process begins.  There are a few possible outcomes for the homeowner at this point, and one of the more common occurrences as of late is the short sale.  A short sale is when a Realtor and a homeowner land an offer to buy the pre-foreclosed home, and the mortgage lender agrees to the price.  This prevents the foreclosure process from actually happening.

There are a lot of misconceptions about short sales, possibly due to their sudden increase in demand. Here are three of the more common misconceptions and their respective truths:

MISCONCEPTION #1: "A short sale is no less damaging to the homeowner's credit than bankruptcy or foreclosure."

THE TRUTH: In a foreclosure, the time period a borrower must take to rebuild his or her credit has been extended to 5 years, and several new requirements now apply after 5 years and up to 7 years after the completion date. This makes foreclosure more damaging to a homeowner's credit worthiness than bankruptcy, which requires a 4-year time period applied from either the discharge date or the dismissal date. Even in the event that the homeowner offers a deed-in-lieu of foreclosure, it still requires a 4-year time period before they are eligible to get a conforming loan again. A deed-in-lieu of foreclosure also includes additional requirements applied after 4 years and up to 7 years following the completion date.

In the event of a pre-foreclosure short sale, where the homeowner is willing to let their house sell for less than the amount owed, Fannie Mae only requires a 2-year time period for reestablishing credit, with no additional requirements.  http://activerain.com/blogsview/693607/BGS3-A-short-sale

MISCONCEPTION #2: "Banks and lenders rarely accept an offer on a short sale."

THE TRUTH: Mortgage lenders lose thousands of dollars when a homeowner stops making their mortgage payment. These holding costs keep piling up until the house is sold. Consequently, when it's proven that a homeowner can no longer make their payments or qualify for a loan modification or forbearance plan, most lenders are willing to settle the mortgage debt for less than amount owed  provided the proper process, documentation, and criteria are completed. In addition to saving on holding costs, the lender (servicer) can also benefit from Freddie Mac and Fannie Mae (investors), which grants up to $1,500-$2,200 for pre-foreclosure sales that meet certain conditions.

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0820.pdf

http://www.freddiemac.com/service/factsheets/woinc.html

MISCONCEPTION #3: "There is no way to solve a pre-foreclosure situation without one of the parties involved taking a serious blow."

THE TRUTH: BGS3 has an approach, Program 3648, that benefits everyone. The homeowner behind on mortgage payments can easily understand their rights and options. They can get free help from a Certified Program Representative (CPR) for BGS3 to do a forbearance plan or a loan modification to keep their home. Or, if they decide that a short sale is in their best interest, the CPR who is a licensed real estate professional can list their home at a price that it can actually sell regardless of the loan balance, still at no cost to the homeowner. BGS3 then processes the real estate short sale and negotiates the debt with the mortgage company for a nominal processing fee, which the mortgage company gladly pays for the help in clearing their books.

http://www.program3648.org/

In a recent conversation I was asked, "How does a short sale really help the homeowner?"  This was not the first time I had been asked this question, but considering the source was a prominent individual with 20 years in mortgage lending, it was the first time I realized such uncertainty in the industry.   Keeping families in their home and choosing the right loan modification or refinance program is most important and must be the priority.  However, when this is not possible, paving the way to enable families to become homeowners again as soon as possible is the next best thing. 

Many benefits of the short sale are outlined in the Mortgage Forgiveness Debt Relief Act of 2007 - H.R. 3468, but perhaps equally important, are the new underwriting guidelines issued by Fannie Mae this past June.  https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0816.pdf  With a foreclosure on their record, a homeowner must wait five years to be considered for new funding.  This time requisite has been increased from the previous 4-year standard.  Additionally, conditions such as a minimum credit score of 680 and a 10% down payment now apply before underwriting will be considered.  Deed-in-lieu-of- foreclosure remains a 4-year wait from the date the deed-in-lieu was executed.    

Here is the benefit to a short sale.  With this transaction on their record, these cooperative homeowners are only required to wait two years from the date the short sale is completed to be considered for a new mortgage.   It is not a matter of "if it's true," because it is.   It is startling that few real estate professionals understand the advantage this brings to their customer and how this benefits them professionally.      

As a Realtor, it makes perfect sense to build relationships with homeowners that are looking for an alternative to foreclosure.  You have a unique opportunity to build a trusting relationship and help a family in crisis.  Is there a better way to establish a client for life?  You earn a commission on the short sale, will earn a commission when your client seeks home ownership in two years, and will receive quality referrals to others seeking a Realtor they can trust.  In today's market, a short sale today truly means a homebuyer tomorrow.

For more information concerning the Mortgage Forgiveness Debt Relief Act of 2007 - H.R. 3648, please visit www.program3648.org.