In the beginning lenders were reluctant to approve a short sale. Once it was very obvious that values were trending down they started to negotiate but still take long to approve short sales. This is probably because they are overwhelmed with so many files. In my opinion the mortgage debt relief act didn't help either because it gave the public a reason to walk away from a debt that they made a promise to pay and not face any consequences. The unintended consequence of the act was more short sales and foreclosures therefore a spike in inventory or supply.  Demand just couldn't keep up with the amount of supply coming on the market especially as lenders took away many of the programs that people were using to get into homes.

Now that values have dropped people can't refinance out of their loans but can't afford the new payment either. Why wouldn't a bank agree into locking their rate so that the person can stay in their home? Good news, lenders are now opening their eyes and realize that everyone is better off if borrowers stay in their home and lenders can avoid a foreclosure. Most lenders now have loan modification departments. This is one of the smartest things I have seen. Borrowers facing hardship can plead their case for a lower payment or for their payment to be fixed and not adjust. After the lender reviews the borrower's situation they make a decision. All cases are different and they will be evaluated on a case by case basis.

I just successfully negotiated a loan modification for a client who has a husband on disability and she has had to take time off of work to care for him. The lender dropped their payment by $2000 and reamortized the loan. My client is upside down but she didn't want to walk away from her home. I applaud her for that and I applaud the lender for having a heart and looking out for the best interests of everyone. This was one less short sale on the market. Less inventory of homes on the market begins to bring supply closer to what demand is currently at and values now make FHA financing a possibility. FHA financing along with rising rents should create a spike in the demand for housing. If more borrowers are successful at negotiating a loan modification then our supply and demand should reach an equilibrium a lot faster and we can return to a normal market.

Homeowners you now have more options than ever. Here are some links to use if you are facing foreclosure: http://www.hopenow.com

http://www.nw.org

http://www.995hope.org

http://www.moneymanagement.net

http://www.hud.gov

You can also call or email me and I will be glad to help. Mario Villagran, MBA, Realtor (818) 416-7511 or mvillagran@dovproperties.com