How Many Borrowers Will Choose Bank of America's Rescue Plan Over a Short Sale Attempt?

I think the Bank America plan is a good one.  It's another tool in the box, to help troubled homeowners.  Whether folks will choose the plan over a "short-sale" would likely depend on if they really need to sell and move now, versus whether they would like to stay.

This is especially true for those that have had payments reset due to interest rate adjustments.  I understand the Plan, in some instances could also reduce principle, not just interest.  As with everything goning on in recent weeks, there are many moving parts to consider!

I suspect renegotiating an existing B of A mortgage, would be less cumbersome, than trying to sell via "short-sale" - As many of us have found, many short-sales are anything but short in reality.

Elizabeth - I think your idea of a middle person to negotiate a lot of the process, is a good one.  As long as it doesn't generate any more scams than has already plagued troubled homeowners.  I have heard positive things about the non profit organization, Springboard or call 1-888 995-HOPE. They do not charge a cent, they are funded by mortgage companies, private donation. They will take your financial and email your mortgage company requesting consideration.  Perhaps something like that for the Bank of America homeowners would be helpful.

I think that if homeowners are given a choice, between this BofA/CountryWide program or doing a short sale, they will go with the one that gives them a place to live at the lowest monthly cost.  They still have to live somewhere!  

The values have fallen enough in many places that payment on a 95% loan of actual market value at 3.5% will be less than market rent! 

We'll just have to watch to see what really happens.

Great Info! It's nice to see professionals like yourself stay on top of what's going on in the market!

Best,

Dan

most people don't want to lose their home, hopefully this will help the right people. plus take some inventory of the market.

I think that there are too many people that have decided what they want to do, and they aren't looking for advice, but rather they are looking for someone to agree with the path they want.  If you don't, they will find someone that will...

Elizabeth, I don't recall on this plan with BOA - are they going to be participating in the future appreciation of the homeowner values do you know, as is the case with the new Hope for Homeowners Plan? I think that would play a big part in whether or not homeowners will embrace it over a short sale.

I'm with you in that I feel the Short Sale will be the preferred way.

I strongly believe that if Lenders would approve more Short Sales it would go a long way in stabilizing the housing market now. We all know that today's Buyers must have solid credit and a nice chunk towards for a downpayment. I would think that Lenders would be all open arms for switching out the two homeowners. I feel the adjustment to the current homeowner's mortgage may just be delaying a future repayment problem on the part of the homeowner. So many homeowners should never have been approved for the subprime loans that they were put into and would be better off if they started over again fixing their credit and acquiring the 20% deposit needed to buy a home. Forget about having to keep up with the Jones'. I'm fearful that this might just be a bandaid approach.

Elizabeth, I don't see this helping as many people as they claim it will. There are some serious issues that may result. First of all, people still have to qualify but under much stricter guidelines. Someone who makes 35 K a year and buys a house for 1 million, even with a 50% decline in the market, they still won't qualify to buy a house for 500K.

The down side is that this is NOT fair to those who go out and work 3 jobs to make their payments. There is something wrong with the picture of your neighborhood when some folks get a write down that don't deserve it and the rest get no benefit. Sounds a lot like rewarding the underserving and punishing the deserving.

I think they will still process short sales because some people just should not have bought a house. I am also sure there are provisions that just like in the rescue plan that the secondary lien holders and HELOCs would have to release their liens. Here in Florida tons of people used their homes as ATM machines and therefore will have to pay back those HELOCS for Hummers and Flat Screens.

Most of the people that we do short sales for could not afford their payments even if they were reduced to 3.5% and at a lessor value and they would not qualify.; so we do short sales. Katerina

I think they will lean more towards the rescue plan to stay in the house and hopefully get the princiapl reduced.

Elizabeth, sorry for not getting back here sooner.  It is my understanding from short sale negotiators that BofA is pursuing deficiecy judgements on recourse loans (non purchase money loans).  This would apply on even to a foreclosure.  Each homeowner's situation is different and seems like the only advice we can give homeowners is to have them talk to attorneys and accountants to see what is best for them.

I think a lot of folks are going to think they are home free by walking away and allowing their home to be foreclosed on, only to have an unexpected deficiency judgment to later rear it's ugly head.

Great post Elizabeth and equally as great discussion!!!  Lets see what happens.  So many rescue plans are being tossed around and discussed but I see far more people in distress than what many of these plans can do to help.  In Miami, many got in over their heads on heir personal residence and can't afford it anyways and many got in on he flipping craze and got stuck with several units, especially condos, that didn't sell.  I still see Short Sales playing a role for a while.  Lets see if the banks continue to be receptive to them.

Elizabeth,

I think that there are indeed many homeowners who will want to take the quickest route out, especially since they are pinched financially on so many sides right now.  However, there are certainly still some with integrity out there and this is great for those who are willing to honor the prior commitment that they made.  Instead of being in a position to be forced to lose their home, this plan makes keeping the home and paying the mortgage possible because the mortgage is now affordable.