Government Gears Up to Sell Your House Short
With Obama’s much-vaunted mortgage modification program all but deemed a failure — one million applications have resulted in 31,000 modifications in the $75 billion program — the administration is set to embark on a new phase in its project to resolve the ongoing mortgage crisis. That phase involves providing banks with financial incentives to allow you to sell your house for less than the value of your mortgage and move one.
One real estate broker is already calling 2010 “the year of the short sale,” an industry term for selling something for far less than you paid for it. Banks save 20 percent over foreclosing on a house, between legal costs and the likelihood that a foreclosed-upon-house will sell for less than the mortgaged value, while homeowners agree to forfeit their homes rather than go through foreclosure and end up broke and out of a house anyway.
The Obama administration plans to offer $3,500 incentives to sell short in order to speed up the process of putting distressed homes on the market, and a Citigroup pilot program will give homeowners a whole grand to get out of their houses so Citigroup can sell them. Banks are pushing the short-sale incentives because of the “largely ineffective loan modification plans,” made ineffective by banks’ unwillingness to do more than temporary modifications or to approve applications. Apparently, rather than enforce the rules of the $75 billion program currently in effect, the administration has decided it’s easier just to let the banks sell the houses and get on with this economic recovery they say is already here.