As the economy begins to show slight signs of recovery, the housing bust is far from over. In fact, without the proper programs to keep foreclosures off the market and maintain the integrity of pricing, we may not be even half way through the housing market crisis. As defaults continue to rise, and workout programs like Short Sales continue to be the best solution for borrowers and the market as a whole, it is critical that more realtors talk to their congressional representatives about the benefits of Short Sales on the market. It is evident by the fact that the average Short Sale price is over 25% higher than the average sale price of foreclosures that these programs are vital to overall housing market recovery.
In an effort to educate policymakers on the benefits of Short Sales, John McGeough and Anthony Lamacchia of McGeough Lamacchia Realty have traveled to Washington, DC three times this year. McGeough Lamacchia Realty is well versed in the benefits of Short Sales as it is the number one Short Sale listing office in Massachusetts per MLS and they are on track to complete between 400-500 Short Sales in 2011 for distressed homeowners.
During their visits, John and Anthony conducted meetings at the FDIC, the US Treasury, the National Association of Realtors (NAR) and also with several Senators and Congressmen on Capitol Hill. Their greatest objective is to convey the importance of Short Sales as a mechanism to stabilize the housing market. “We made it clear to all groups that if they truly want to decrease foreclosures and stabilize this market, they need to force servicers and Government Sponsored Enterprises (GSE”s) to give Short Sales more attention”, said John McGeough.
As important as it is for groups in DC to understand the significance of Short Sales programs, it is equally important to understand the obstacles faced in completing them. One of the meetings Anthony and John were most pleased with was with the FHFA. Anthony states, “The FHFA has the largest say in all things Fannie and Freddie related. We had very positive discussions with them about Short Sales.” A primary discussion point with the FHFA was the challenge of pushing mortgage insurance companies to be more cooperative in working with the GSE’s and lenders on completing Short Sales. Since the market has significantly declined, many mortgage insurance companies would rather have the home go into foreclosure, so they can postpone paying the insurance claims to the GSE’s. To remedy this issue, Anthony recommends providing an incentive for the mortgage insurance companies by allowing them to pay less on the claim if they cooperate on a Short Sale.
The meetings also presented the opportunity to discuss other issues such as the QRM (Quality Residential Mortgage) initiative; which is still pushing for a 20% minimum down payment when purchasing. In addition, the jumbo loan limits, set to expire on September 30th, are looking to be pulled down across the country. The mortgage interest deduction, that every homeowner takes advantage of, is also on the chopping block.
John and Anthony strongly feel that GSE’s and our elected officials need to put their business hats on together to ensure that every home being sold is for as much money as possible. Market data continues to show that Short Sales are stimulating an overwhelming increase in sale prices compared to foreclosures. They believe conducting responsible Short Sales is the best way to accomplish price stabilization. “The key with Short Sales is they transfer properties from homeowner to homeowner and not homeowner to bank to homeowner and that is why they will always sell for more than foreclosures,” said Anthony Lamacchia. Ultimately, allowing distressed homeowners to opt for Short Sales over foreclosures would result in additional monies for lenders and GSE’s, while giving homeowners an opportunity to maintain their dignity at a low point in their lives.
John added, “I found it encouraging that we had three trips in three months to discuss our concerns and real life experiences concerning Short Sales with folks in DC”. John and Anthony strongly encourage other realtors and interested parties to visit DC to voice their concerns and discuss solutions.