Short Sale Blog

Here is the latest short sale news at Seattle Short Sales. We assist hundreds of Seattle area homeowners with short selling their home and avoiding foreclosure.

A Move by California’s Realtors May Help Streamline Short Sales Nation-Wide

Seattle Short Sales - Friday, August 26, 2011

California is one of the states that has been most affected by the housing bust and foreclosure crisis. Over the past year, close to one half of home sales state-wide are sales of distressed properties. In some parts of California, the numbers are even worse: last month, in Madera County, 86% of home sales contracts accepted were for distressed-property sales.

A new move by members of the California Association of Realtors (CAR), as reported by DSNews today, may help to streamline short sales for homeowners across the country.

California, like Washington, is a state that implements non-judicial foreclosure. This means that lenders can pursue foreclosure without going through the courts. Foreclosure is initiated by mailing a defaulting borrower a notice of foreclosure.

CAR recognizes that short sales are important to clearing out the inventory of distressed properties, and that short sales will continue to be important in the coming years. But they are concerned that some of the requirements that lenders have in processing short sales may hold up future transactions. So CAR has sent letters to many of the major lenders, including JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo, with recommendations for streamlining the short sale process. These recommendations include:

  • asking lenders to disclose whether or not they actually own the original loan
  • asking lenders to disclose who has the finally authority to approve a short sale (e.g. the lender or the investor or some third party)
  • requesting that lenders implement a standard process to pre-approve a request for a short sales before a property is listed for sale
  • asking that lenders increase the amount that junior lenders may receive from a short sale, as second mortgages often hold up short sale approvals.

Although this request is coming from CAR in California, if the lenders approve CAR’s requests, this will help to further speed up the short sale process across the country. The number of short sales continues to grow nationwide. Short sales now account for 25% of residential property sales - up three times from two years ago.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

We Already Knew That - But New Numbers Out Show Short Sales are Best Way to Cut Losses for Both Distressed Homeowners AND Lenders

Seattle Short Sales - Friday, August 19, 2011

Well, we already knew that. But some interesting numbers were published yesterday by the HousingWire, showing that short sales are the best option to cut losses - not only for distressed homeowners, but also for their lenders.

It has been clear for a few years now that short sales are the best option for many underwater homeowners, and we have written about the growth in short sales. In theory, loan modifications will allow homeowners to keep their homes. In reality, however, most loan-mods end in failure. They are either tied up for so long in paperwork that they never become permanent, or the new payments are so high (sometimes even higher than the original payment!) that many homeowners redefault within 12 months of negotiating their loan-mod.

Short sales provide a homeowner permanent way out of a home mortgage that has become unaffordable. What has changed in the last few years, though, is that we used to have to work hard to get a lender to agree to a short sale. However, in the last year or so, lenders and loan servicers have started to realize that short sales are often the best way for them to cut their losses too! In fact, many of the major lenders have actually become proactive about suggesting short sales to their delinquent borrowers, even offering financial incentives to homeowners who complete a short sale.

Yesterday’s report puts some hard numbers to the stunning growth of short sales:

  • Two years ago, short sales accounted for 8% of distressed property sales. That number has grown by over three times: today, 25% of distressed property sales are short sales.
  • As of the middle of this year, the average time it took to complete an REO property sale was 17 months, while for a short sale it was only 12 months. (By the way, our track record of short sale completion here at Seattle Short Sales, Inc., is much quicker - most of our short sales are approved within 1 to 3 months of submission).
  • As of the middle of this year, servicers’ losses on REO sales average 70%, whereas for short sales they average less than 60%.

The HousingWire report also mentions the long-term advantages for homeowners who avoid foreclosure by completing a short sale. Borrowers’ FICO credit score can drop by as much as 400 points following foreclosure, whereas a short sale will typically cost them only 50 to 200 points. And borrowers who complete a short sale may be eligible for a new mortgage in one to two years, whereas those who have been foreclosed upon may have to wait five to seven years.

Additionally, at Seattle Short Sales, Inc, we have a strong track record of negotiating a waiver on the deficiency balance for our homeowners: this means that they are cleared of ever having to pay back the shortfall on their mortgage repayment following the short sale. Currently, well over three quarters of the short sales that we negotiate for our clients are coming with full deficiency waivers.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Bad News for Seattle: While Foreclosure Rates Drop Nationwide, Seattle Foreclosure Rate Jumps by 10% For First Half of 2011

Seattle Short Sales - Thursday, July 28, 2011

A press release published this week by foreclosure-listing firm RealtyTrac indicates that, while foreclosure rates have dropped across the nation, Seattle showed the greatest rise in foreclosures of the 20 most-populated metropolitan areas in the country.

The report compared the foreclosure rate for the first six months of 2011 with the foreclosure rate a year ago, for the first six months of 2010. It looked at data from all of the nation’s 211 metropolitan areas that have populations of more than 200,000.

178 of the 211 metro areas, or 84%, showed a decrease in foreclosure rate compared to mid-2010. Cities in California, Nevada, and Arizona accounted for the majority of high foreclosure rates.

Although the foreclosure rate is dropping nationwide, the RealtyTrac study does not take this as a sign of improved economic conditions. Rather, they attribute the drops in foreclosure rate to hold-ups in the system.

According to the statement: “These dramatic decreases indicate the foreclosure pipeline continues to be clogged in many local markets across the country, sometimes by a glut of already-foreclosed properties that are not selling quickly, sometimes by a mountain of improperly filed foreclosures that are blocking the inflow of new foreclosure filings — and sometimes by both.”

The news for Seattle is disturbing, however. The report looked specifically at the 20 largest metropolitan areas in the country. Of them, 19 showed drops in foreclosure rate. The only exception within the 20 largest cities was Seattle, where the foreclosure rate jumped by 10% compared to the same period a year earlier.

One in every 98 Seattle homes received a foreclosure filing in the first six months of 2011. Seattle had the 97th highest foreclosure rate in the nation in the first half of 2010. But in the first half of 2011, Seattle’s ranking rose to 57th-highest.

High foreclosure rates, and more homes ending up as bank-owned REO inventory, will continue to keep home prices low. Two recent studies predicted that further house drops, of up to 25%, may be on the horizon. And recent estimates are that the current shadow inventory of foreclosed homes will take three years or more to clear.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Short Sales Continue to Grow in Spite of Decline in Other Foreclosure Prevention Actions

Seattle Short Sales - Tuesday, June 28, 2011

We reported to you last year that the FHFA’s second-quarter report showed that the number of short sales had increased by 250% over the same period a year earlier.

Well, that trend shows no signs of slowing down!

The number of completed short sales for 2010, at 107,953, was nearly a 200% increase over the number completed in 2009. And the FHFA’s Foreclosure Prevention and Refinance Report for April 2011 suggests that 2011 will be just as strong - with 35,406 short sales already completed as of April.

graph of short sales numbers 2008 2009 2010 2011

These rising numbers are especially significant if you take them as percentages of total Foreclosure Prevention Actions (FPAs). FPAs can be divided into two types:

  • “Home Retention Actions” which include loan modifications, repayment plans, and forbearance plans
  • “Home Forfeiture Actions” which include short sales and deeds-in-lieu

The total number of FPAs processed through the nation’s largest investors, Freddie Mac and Fannie Mae. has actually gone down over the past year, from 82,227 in the month of April 2010, compared to to 57,996 in April 2011. However, the reason that that number has gone down so much (that’s 30% in just one year) is entirely due to the drop in Home Retention Actions.

While Home Retention Actions went down, from 73,052 to 47,347, the number of Home Forfeiture Actions actually went up. As a percentage of the total, short sales went up from 11% (8,741 of 82,227) to 17% 9,701 of 57,996) of all FPA’s, just within the past year.

graph of foreclosure prevention actions 2010 2011

While many homeowners know that a short sale is the best and fastest way to recover from a mortgage that they can no longer afford, or from a negative-equity situation, loan servicers used to be reluctant to approve short sales. However, servicers and investors are also discovering that short sales are often in their best interest as well, as they may recover more on their loans than they would from pursuing costly and lengthy foreclosures. Several loan servicers have even started to proactively offer cash incentives to encourage their borrowers to pursue a short sale - and that will be the subject of our next blog post.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

The Time to Act is Now: Two Separate Studies Forecast Further Housing Price Drops of up to 25%

Seattle Short Sales - Saturday, June 11, 2011

Homeowners who are already experiencing problems paying their mortgages will not benefit by trying to "wait things out." There are no indications that home prices will recover any time soon - but there are signs that they could drop even further.

The nationwide average home price is already down 34% nationwide from the high in 2006 - and two separate studies released this week predict that the slide is far from over.

Housing prices have dropped every month since the federal government’s tax break for homebuyers expired last September. Overall, that’s a drop of 5% in the last year alone.

However, a new report released this month by JPMorgan and reported by the HousingWire forecasts a base price level that is 37% below peak prices - in other words, even lower than current levels. They indicate that home prices could stand to fall another 4 to 5% in the next year.

But Yale University professor, and co-founder of the Standard & Poor Case-Shiller Home Price Index, Robert Shiller, is even more pessimistic. As reported by the HousingWire, Shiller forecasts a longer-term but even greater drop in home prices - a possible decline of between 10 and 25% in real terms over the next five years.

Fundamental factors are holding home prices down; and these factors are all tied together, so will not resolve themselves soon:

On top of these factors, the growing shadow inventory of properties (currently estimated to take over 3 years to clear) that will come on the market in the future also will continue to depress home prices for years to come.

What this means for homeowners who are currently struggling to pay their mortgages is that waiting for the market to improve is a dangerous strategy. Home prices are likely to continue dropping for one to five years.

For homeowners who are already in trouble now, or who foresee financial trouble coming, this is their opportunity to take action - before home prices drop even further.

Short sales are an increasingly popular option with both homeowners and with lenders. The majority of our first-mortgage approvals come with full deficiency waivers for our homeowners, and an increasing percentage of our second-mortgage approvals also waive the deficiency balance on the loan, allowing distressed homeowners to shed all of their mortgage debt and get a clean financial start in life.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Deficiency Language Wording: Part 2 - Tricky Wording in Short Sale Approval Letters

Seattle Short Sales - Saturday, June 04, 2011

As we noted in Deficiency Language Wording: Part 1, deficiency language in short sale approval letters can be tricky. The deficiency language may be absent altogether - but don’t take that as a good sign. No mention means no release.

If you need a reminder of what a deficiency balance is, or of the two parts of a mortgage (the lien and the promissory note) please refer to Part 1.

In order to approve a short sale, the lender must release their lien on the property. But that is only the security interest. In Washington State, the lender does not necessarily have to release or waive their rights to the deficiency balance (unless the short sale was processed through a program such as HAFA, FHA or VA). So, even though you have been approved to sell your property short, and pay back your lender less than the amount owing on the loan, this does not mean that you do not owe them the shortfall.

It is important to note here the difference in position between first lender or lien position, and the position of second (and other junior) liens. If the home moves into foreclosure, and it is sold via trustee sale for less than the balance owing on the mortgage, in Washington State the first lender loses their right to pursue the shortfall (the deficiency) while the junior lenders retain their rights to pursue the deficiency. For that reason, it is our expectation that for a short sale, the first lender will waive their deficiency balance rights (because they would have lost them via a trustee sale anyway) whereas that junior lenders might demand to retain deficiency rights.

However, in either case, if the deficiency balance (that shortfall) is not specifically waived in the lender's approval letter, in plain English, then there is the possibility of the lender (or another debt collector) pursuing you for it, possibly even many years down the road.

"Mortgage" or "lien"? To complicate things even further, the word “mortgage” can be vague. The “mortgage” may be interpreted as the “lien,” or security interest, or it may be interpreted as the whole mortgage loan - the lien plus the promissory note.

"Release" or "satisfy"? If your approval letter does not specifically address the deficiency balance owing from that promissory note, and only addresses the “mortgage,” then make sure that the lender states that the proceeds from the sale “satisfy” the mortgage (i.e. the whole terms of the mortgage loan, which includes the deficiency balance owing) and not merely “release” or “discharge” the mortgage (which can be interpreted as only releasing the lien, but not the deficiency balance).

Specific or vague? Different lenders address the deficiency very differently. Some lenders, such as Bank of America, have very standard language that appears in every letter, so it is extremely clear that the deficiency either is or is not waived. But many lenders use vague language, which either addresses the lien only (releasing the security so that the short sale may proceed) without even mentioning the outstanding debt or deficiency. A few lenders us very confusing language, which is difficult to interpret, and may sound like the deficiency has been released when really it has not been.

What to watch out for:

  • Approval letter that releases the lien without mentioning the deficiency balance.
  • Approval letter that refers to the mortgage rather than the deficiency balance; if it does, make sure that it states that the mortgage is “satisfied” and not merely “released” or “discharged.”
  • Mixed up terms, e.g. “satisfying the lien” and “releasing the mortgage” rather than “satisfying the mortgage.” Read the letter slowly and carefully if it is not clear - and be sure to get qualified professional advice.

Our Seattle Short Sales, Inc. case managers don’t only push to close a deal. We review the terms, including the details of the deficiency language on all of the short sale approval letters that we negotiate for our homeowners. This March, a full 80% of the short sale approvals we negotiated came with clear language that waived homeowners of their obligation to pay back the deficiency balances on their mortgages.

In reviewing our short sale approval letters, we have seen in recent months that there are fewer problems with vague deficiency language; our lenders are using increasingly clear deficiency language, so that all parties know where they stand. We have also seen that more lenders are completely releasing homeowners from any obligation to pay back their deficiencies.

Part 3 of this article series will give specific examples of deficiency wording from real approval letters that we have negotiated in 2010 and 2011.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

More Bad News for Homeowners: April Sees Increase in Number of Homes Either Delinquent on Mortgage or in Foreclosure

Seattle Short Sales - Thursday, May 19, 2011

According to information released by Lender Processing Services, and summarized by the HousingWire this week, the number of “troubled home loans” - those either 30 or more days delinquent or in foreclosure - increased from March to April of this year by 2.4%, although it is still 16.4% lower than for the same period one year ago.

The total number of properties that are either delinquent or in foreclosure nationwide is 6,388,000 - representing nearly 8% of all home mortgages nationwide. Of them, 2,184,00 are in foreclosure. Of the remaining 4,204,000 that are at least 30 days delinquent, a total of 1,961,000 are more than 90 days delinquent but not yet in foreclosure.

With over 2 million properties in foreclosure, and nearly 2 million more over 90 says delinquent and therefore nearing foreclosure, this will represent a potential shadow inventory of about 4 million homes.

Estimates earlier this year indicated that the current shadow inventory could take 41 months to clear. A large shadow inventory, homes that have yet to hit the market, means that the supply is high and prices remain low: bad news for homeowners who are already struggling to pay their mortgages or who are in (or close to) a negative equity situation.

The median sales price for existing homes dropped by 5.2% from February 2010 to February 2011. This most recent increase in delinquency rates, and its implications for a large REO inventory for years to come, suggests that we still have a long wait before home prices begin to recover.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Deficiency Language Wording: Part 1 - What You Need to Know

Seattle Short Sales - Sunday, May 15, 2011

A short sale can be a clean way for a distressed homeowner to exit from a a mortgage that they can no longer afford. Proactive homeowners can use a short sale to prevent foreclosure and avoid the black mark on their credit rating that foreclosure brings - all important moves here in Washington State, where the foreclosure rate is on the increase (as of the February, up 64% from a year before).

But a short sale alone may or may not give you a clean new financial start. Your financial future actually depends upon the fine print - literally! A short sale means that, with your lender’s permission, you sell the home and pay off the loan “short” of the full balance. This shortfall is called the “deficiency.” And it is the fine print on your approval letter that indicates whether you are, or are not, reponsible to pay back this deficiency.

This is where having experienced short sale specialists on your side can save you tens or even hundreds of thousands of dollars. If you review our list of short sale approval letters, you can see what kind of discounts (deficiencies) our clients have been receiving on their mortgages - many of them over $100,000. If the homeowner’s approval letter for the short sale does not specifically waive their responsibility to pay back the deficiency, there is the possibility that debt collectors may come to collect this balance, even many years down the road.

At Seattle Short Sales, Inc., we pride ourselves both in positioning ourselves at the leading edge of this quickly changing industry, and in sharing our knowledge with our industry colleagues and with homeowners. In the last year, we have doubled our success rate in having deficiency balances fully released. We push lenders to release sellers of deficiency obligations wherever possible, and for clarity in deficiency language so homeowners know exactly where they stand and what their future holds.

In this two-part series, we’d like to share with you some of our recent results, and our analysis of changing trends in how lenders approach deficiency language in approval letters:

Deficiency basics
In Washington state, a mortgage loan consists of two parts:

  1. The mortgage or lien against the property is the lender’s security. You agree to pay back the loan - but if you default on your part of the agreement, they can come and take your security (i.e. foreclose on the property).
  2. A promissory note, which is your promise to pay back the money that they have lent you.

If you receive an approval letter from your lender to undertake a short sale, the lender must release their lien on the property in order for the sale to go ahead. All short sales necessarily mean that Part 1 of the mortgage, the lien, will be released.

But a lender’s approval does not necessarily mean that they have relieved you of your obligation to pay back the amount you promised to pay in Part 2, the promissory note.

For example:
You owe $280,000 on your loan, but your home is now worth only $240,000. Your lender approves a short sale at this price. After closing costs and commissions, the lender will receive $200,000 on the loan (their “acceptable net proceeds” in the approval letter).

The shortfall on your loan repayment is $80,000 ($280,000 - $200,000). This is the deficiency balance.

By approving the short sale, the lender has agreed to release the lien on the property - their security.

If there is no specific language about the deficiency balance in the approval letter, then this deficiency balance has not been waived. Even though the lender has approved the short sale and you no longer have the house, you still owe $80,000 on the loan - but your loan is now unsecured. Your lender may or may not choose to pursue you for it. Often, lenders sell their unsecured loans to third-party debt collectors, who may try to collect the funds from you years later.

However, if the language in the approval letter indicates that this deficiency balance is waived, then the loan is finished: over, closed, done. The lender has agreed to swallow the loss, and you are free to go ahead with your life: start saving again, investing, thinking about purchasing a new home, without the fear that debt collectors could show up at your door at any time in the future.

Tricky language
Negotiating a short sale is an important first step to financial freedom. But the most important step to a clear future is having your deficiency balance waived. In March 2011, a full 80% of the short sale approvals we negotiated came with full release of the deficiency balance for our homeowners.

But deficiency language in approval letters can be tricky. The language may be vague, or it may be absent all together. The rule of thumb is that, if the language does not specifically waive the seller of the obligation to pay back the deficiency, or specifically state that the debt is satisfied, you may be liable to pay back the deficiency balance. A complication is that every lender uses different wording; there is no standard. It may be difficult - even for industry professionals - to understand whether the wording in an approval letter does or does not release the homeowner from their obligation to pay back the deficiency.

To the homeowner, though, whether or not they have been waived of having to pay back the deficiency balance is of utmost importance. Our next posts in this series will give specific examples of deficiency language, as used by major lenders such as Bank of America, Citi, and GMAC as well as by many of the smaller lenders - all examples taken from real short sale approval letters we have negotiated for our clients.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

How Late Mortgage Payments, a Short Sale, or Foreclosure Can Affect Your Credit Score

Seattle Short Sales - Friday, April 15, 2011

Fair Isaac, the creator of the Fico credit rating system, has traditionally been reluctant to release their formula for calculating consumers’ credit scores. However, as reported last week by the Wall Street Journal, in response to various rumors and incorrect information about how credit scores are calculated, FICO’s director of mortgage markets Joanne Gaskin has compiled and released information on how credit scores are calculated.

A credit score of 750 or more is considered to be very good. The scale ranges from a low of 300 up to 850. A good credit score is important to qualify for a home loan or other loan in the first place. But your credit score also makes a difference in the interest rate you receive for your loan. The Wall Street Journal article gives these two examples, showing how a borrower with a higher credit score may save thousands of dollars in interest:

  • A person with a 620 score would pay almost 12% interest on a four-year $25,000 car loan, compared with less than 5% for someone with a 780 score—a difference of almost $4,000 over the life of the loan.
  • On a 30-year fixed-rate $250,000 mortgage, a person with a 620 score might qualify for a 6% rate, but probably wouldn't be able to get mortgage insurance, which is required if your down payment less than 20%. A person with excellent credit might land a rate less than 5% and pay about $3,000 a year less.

The hit to your credit score for specific actions, such as late mortgage payments or a short sale, depends upon your original credit score: the better your score, the harder the hit. For those who start with a higher credit score, it also will take longer to regain that high rating. Here are some examples:

Table showing how late payments, short sale or foreclosure affects credit score

If your credit score has taken a hit, the best way to rebuild it is by using it. If you simply try to avoid borrowing, you essentially “freeze” your credit score at that damaged level. Borrowing, and paying back your loans by making payments on time, is the best way to rebuild that credit score.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Washington “Foreclosure Fairness Act” Passed This Week Will Provide More Options to Homeowners

Seattle Short Sales - Friday, April 08, 2011

This week, the Washington State legislature passed the new House Bill 1362, also known as the Foreclosure Fairness Act. The bill, sponsored by Democratic state Rep. Tina Orwall (Des Moines) is aimed at reducing the high rate of foreclosures in Washington State. The bill was passed by the Senate at the end of March, but with amendments, so it had to return to the House, where it was passed on Wednesday.

Recent data released by RealtyTrac indicate that Washington State had the 11th highest number of foreclosures in the country for February 2011. One third of these were in King County, with Snohomish and Pierce Counties together accounting for another third.

According to HB 1362, section 1a, "The rate of home foreclosures continues to rise to unprecedented levels, both for prime and subprime loans, and a new wave of foreclosures has occurred due to rising unemployment, job loss, and higher adjustable loan payments.”

This represents a significant rise in the foreclosure rate for the state; two years ago, Washington ranked only 25th nation-wide. Over 77,000 families state-wide have lost their homes in that time period, and 43,000 more families are expected to lose their homes in 2011.

The Foreclosure Fairness Act has been drafted with the intention of slowing the foreclosure rate in Washington State by providing homeowners with information and alternatives. There has been a growing recognition that the current American foreclosure system is “broken,” with many struggling homeowners stymied about their options due to problems communicating with their loan servicers: long telephone waits, lost paperwork, not getting to speak to right people. The new bill will bring homeowners and servicers face to face, in the company of a third party to facilitate negotiations.

Rep. Orwall told the Seattle Medium that “one of the keys to restore Washington’s economy is to stabilize the housing market through a proactive and effective strategy that helps families keep their homes. Mediation is an important new tool to ensure that all options have been explored before moving to foreclosure.”

The new bill will require that lenders provide homeowners with a notice of how much of a payment (including any fees) is required to reinstate a deed of trust before recording notice of foreclosure sale, and also that they explain that mediation is an option. It will allow for the provision of a professional housing counsellor (i.e. a disinterested third party) early in the process, to help with communication, in order to try to avoid issuance of a foreclosure notice in the first place.

If the homeowner and servicer cannot come to an agreement, the bill then provides for foreclosure mediation: help from the third party in looking at alternatives, such as short sales. Foreclosure mediation has already dropped the foreclosure rate in other states.

The bill also provides for a mechanism for funding the new housing counsellors. Financial institutions which issue more than 250 notices of default in the preceding year will be required to pay a $250 fee on each notice of default. The fee will also help to fund outreach campaigns as well as the costs of enforcement of the new regulations.

“Foreclosure may sound like someone else’s problem, but when it’s happening en masse, like it’s happening right now, it’s all of our problems,” commented Sen. Adam Kline to The State Column, noting that a high rate of foreclosure “tears the connecting threads out of our neighborhoods.”

Foreclosure mediation, aimed at finding alternatives to foreclosure, will not only help individual homeowners. Reducing the foreclosure rate statewide will also help the housing market as a whole, speeding the recovery of home prices and eliminating the problem of negative home equity that currently plagues one third of Seattle area homeowners.


If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

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