Just the other day Fitch Ratings reported that the loss severities on residential mortgage-backed securities are expected to increase by between five and ten percent in the coming year. This increase is due to the fact that loss mitigation and foreclosure expenses are continuing to increase. And, as a result of these increases, Fitch Ratings reports that servicers may be looking again to short sales as the best solution to the loss mitigation problem.
According to an article on HousingWire, the percentage of principal lost when a prime loan is foreclosed is currently at 44%. Fitch believes that this may increase to 54% in the coming year. Interestingly, the loss severity for subprime loans is currently at 75% and may increase to 85% in 2011.
The Fitch Managing Director, Diane Pendley stated, “Servicers are increasingly turning to less costly alternatives to foreclosure such as short-sales.” The reason that servicers opt for short sales is because the recovery rate on a short sale is generally 10% higher than in a foreclosure.
What does this mean for Realtors®? For Realtors®, this just means another few years of short sales. But, don’t dismay. Remember when you took your first real estate classes. You were told, “If you don’t list, you don’t last.” Well, despite the rocky economy, now is a great time to take more listings than ever before and help your clients out of a tough spot. If you need short sale support, contact Short Sale Expeditor®.
Facts courtesy of HousingWire article by Job Prior
Opinions courtesy of Melissa Zavala ;-)