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Not Everyone Supports The Government’s Short Sale Plan

Posted March 30, 2010 by Matthew Denton

Well, To Each His Own

When I first heard about the government’s plan of encouraging underwater homeowners to settle for a short sale starting on April 5, I was pondering so much about the positive effects of the program. Lenders that participate will receive $1,000 for every successful short sale and another $1,000 for each deed in lieu of foreclosure, in which the borrower voluntarily transfers the property to the lender. And don’t forget the $1,500 relocation allowance for the homeowner who had to undergo the tremendous amount of processing their paperwork. Little did I know that some people are strongly opposed to it.

For example, The Suncoast News interviewed Victoria Barley, the immediate past president of West Pasco Board of Realtors. She opines, “I agree, this is not the proper use of money. I have never agreed with the short sale process, period.”

Speaking in the same report, Greg Armstrong, secretary of West Pasco Board of Realtors says, “…We will know how well it works in a couple of months, but it is designed to encourage sellers to stay and take care of homes via a short sale rather than throwing in the keys and driving off. I will agree that it would be easier for us all (in real estate), but it isn’t what is best for our economy, our property values or our community.”

The Washington Post writes, “…The Obama plan tilts to consumers by requiring second-lien holders to drop all financial claims against short-selling borrowers beyond the $3,000 they take out of the deal. Travis Hamel Olsen, chief operating officer of Loan Resolution, a Scottsdale, Ariz., consulting firm, says the $3,000 payment won’t be enough for many second-mortgage lenders. Today, they frequently obtain additional short-sale compensation from sellers as the price of their participation—in cash or through promissory notes—far beyond $3,000.”

Finally, Ben Pargman, CEO of The Short Sale Service Inc. writes in his blog , “…there will continue to be millions of potential short sales that do not fit the guidelines and/or will not be able to “fix themselves” without the involvement of a competent investor (a move back to the days of “ugly, weird, haunted, or high-end”).  Where an investor can add value, contribute, and construct deals that would not happen without them, there will continue to be an abundance of opportunity.”

I do not find any of their opinions completely absurd or even pessimistic at all. I may support the Home Affordable Foreclosure Alternatives Program but after reading these comments, these people might have a strong point too.

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