Freddie Mac CEO Ed Haldeman said the company has seen the number of its short sales increase 600% from 2008 as lenders look to dampen the impact of foreclosures hitting the marketplace.
In a statement put out this week, Haldeman said Freddie Mac is doing everything it can to prevent more foreclosures, and that short sales are becoming an ever-popular tool, particularly in situations where foreclosure is imminent and modifications have failed. I don’t think this is a surprise to anyone, as we’ve all seen this trend growing exponentially over these past 12-24 months.
That number could increase as the Home Affordable Foreclosure Alternatives (HAFA) program takes hold. The Treasury Department launched it in April to provide cash incentives to servicers for conducting short sales and deeds-in-lieu of foreclosure. Though I personally have yet to see this program really take hold, I remain optimistic and hopeful that it will. For more information, please visit our HAFA section.
RealtyTrac, an online foreclosure marketplace, is even preparing a short sale report to go along with its usual foreclosure report every month. It won’t be available until the end of 2010, however.
“Foreclosure alternatives like short sales and deeds-in-lieu help borrowers to avoid the stigma of foreclosure, shorten the waiting period before they can buy a new home, and may inflict less damage on their credit reports,” Haldeman said.
He added that these alternatives are also helpful to lenders and insurers. Citing several independent studies, Haldeman said banks lose more than $50,000 per foreclosed home or as much as 30-to-60% of the outstanding mortgage.
While short sales still add to the housing supply and can put pressure on local home values, they often avoid the lack of maintenance or damage foreclosed homes often display.
Overall, it’s a much-better alternative to foreclosure in most circumstances. We’ve been supporting this thought for years and through hundreds of deals. It’s just nice that the ‘press’ is starting to publicize it, as these times will be more-difficult for more people tomorrow than today.
– Jeff Grant, President, ShhortSale.com