It is interesting if you look at the pages and pages of foreclosures going to publication in the Murky/News. You might think that there is going to be a glut of foreclosed property on the market. There probably should be, but it looks like some of the lenders are holding off on selling some of their inventory and letting the market settle down a little.

 

It is really of no advantage to lenders to depress the market and put more homeowners’ upside-down on their homes. Having a glut of foreclosed homes on the market also costs the lenders as they lose more on the homes in their portfolio. It looks like several of the major players in the market are in no hurry to complete foreclosures on distressed properties and also in no hurry to put Real Estate Owned (REO) properties up for sale.

 

This doesn’t cost lenders as much as you might think as all of the major players have portfolios of loans from failed institutions like WAMU, Indy Mac and Countrywide that they acquired at a discount at the federal fire sale. It’s easier to hold back on inventory that you bought for ten cents on the dollar than your own stuff!

 

Another reason that lenders do not want to finish foreclosures is that the FDIC requires them to hold cash reserves in the amount of the REO loans on their books. That is money they can not lend and use to make a profit. And banks are all about profit!

 

The bad part of what is going on now is that a lot of banks are also dragging their feet on short sales to avoid losses and delay foreclosures. Any payments they can get out of a homeowner is money they did not have before. For those of us who worked short sales back in the early 90’s, they were much easier. There were no institutional middle men or intermediary companies and you could actually talk to a vice president who could make a decision. Now you go through someone who collects paperwork and then are assigned to a “negotiator” who is insulated from the borrower, agents and attorneys.

 

Banks are taking two to six months to close short sales. That sound you hear is the dragging of feet! Right now they are pushing a lot of buyers against the November 30^th deadline for closing and receiving the $8,000 federal tax credit. A cynical person might think that the lenders are using the deadline to squeeze more money out of the transaction.

 

The glass really is half full. As long as lenders ration the number of foreclosed properties on the market, they keep values from falling farther. That has to help the recovery from this recession and benefit everyone. It would be nice if banks would help the homeowners in default also, but banks don’t really work that way!

 

 

If I can show you how to have an easier, smoother transaction, would you work with me?

 

Chris Morris

Broker Associate

Alain Pinel Realtors

408.357.8783 direct