Has anyone else heard the news about the Obama administration trying to push banks to pay for loan principal reductions? Sources say they're asking for a commitment from loan servicers to reduce loan balances for borrowers who owe more on their mortgages than what their homes are worth.
If the administration squeezes hard enough, and the banks are forced to bear their own losses, the overall decreases in principle amounts could make for some interesting advantages to agents processing short sales.
At SSAA, we're already beginning to teach our agents how to use this legislation to their clients' advantage. Many of the short sales our agents process require the purchase price to come within a certain percentage of the original loan balance.
Let's consider, for example, processing an FHA Pre-Foreclosure Sale (FHA short sale): the net offer must come within 63% of the mortgage balance. Meeting these guidelines is especially burdensome for sellers in areas hit hard by the foreclosure crisis like California, Nevada, Arizona, and Florida.
If those balances are decreased, the chances for acquiring a short sale approval drastically increase as well.
Furthermore, the proposal requires banks to reduce second-lien mortgages when primary mortgages are modified. SSAA members already have access to a solid complilation of second-lien negotiation techniques, but it's not often we hear about the government actually stepping in to help us out.
Let us know how you think this current proposal from the Obama administration will affect the distressed property market in your area.
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