short salesJust 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 ;-)

 

 

 

Melissa Zavala 
BROKER/REALTOR® ● CA DRE #01324959

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5 Comments on Short Sale or Foreclosure? Here We Are Again - Latest Report

DEC
18
2010
133,795 Points Called Shot Master

Always good to read your articles Melissa. Thanks for good writing and your work. Recommend you to a friend up in Northern California. Steve
7:51pm • #1
201,522 Points 7 Featured Posts Attended Rain Camp Called Shot Master

It is going to be a tough year if you don't list.  There are fewer qualified and willing buyers and if you have well priced inventory, at least you can put food on the table and stay in the business.  Good Post.
7:58pm • #2
DEC
19
2010
309,748 Points 28 Featured Posts Outside Blog Called Shot Master

Servicers and lenders have known for a long time that they lose more on foreclosure than they do on a short sale. However, that doesn't stop them from denying good short sale offers and pushing houses over the foreclosure cliff.
12:50am • #3
942,353 Points 95 Featured Posts Outside Blog Attended Rain Camp

Dave: That's exactly what makes this article so interesting.
9:50am • #4
356,537 Points 4 Featured Posts Attended Rain Camp

Melissa,

Do you know if the 10% is after the expenses of processing a short sale vs the expenses of processing an reo?
10:32pm • #5

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