According to a HousingWire article by Jon Prior, Freddie Mac intends to increase short sale incentives soon—though it doesn’t specify by how much, or to whom.
That’s still good news, and may indicate that the GSE giant is seeing the effectiveness of short sale incentive programs initiated by servicers on their portfolio loans.
As the article notes, both Freddie and Fannie Mae have been ambivalent about the Treasury Department’s HAFA program to date: They both offer $2,200 incentives to servicers who complete HAFA transactions—as contrasted with $1,500 in the original Treasury version. But both GSE’s have failed to increase the aggregate amount available to junior lienholders from the anemic $6,000 provided in the original program. (Treasury realized that this was a sticking point for many HAFA transactions, and exempted non-mortgage junior lienholders from the cap.)
Perhaps partly as a result of that rigid policy, only 1,600 of the 27,600 HAFA sales completed through last year were Fannie or Freddie transactions.
But the alternatives to short sales are distinctly unattractive for the investors in most cases. And in an age of strategic default, more homeowners are opting to simply wait out the foreclosure process—further aggravating investors’ loan loss severities. In this environment, it’s in the investors’ interest to induce these homeowners to short sell—even if that means sweetening the deal considerably.
Servicer incentives to homeowners on their portfolio loans have been upwards of $20,000 in some cases. And it’s working.
We’ll soon see how serious Freddie Mac is about priming the short sale pump.
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