This letter was published in the Bakersfield Californian, Fresno Bee, Los Angeles Times, Mercury News, Sacramento Bee, San Diego Union Tribune and the San Francisco Chronicle.
March 10, 2011
An important message from the CALIFORNIA ASSOCIATION OF REALTORS®:
I write on behalf of the CALIFORNIA ASSOCIATION OF REALTORS®, whose
170,000 members continue to witness the devastating consequences the
home foreclosure crisis is having on California’s families,
neighborhoods, and communities on a daily basis.
The number of families affected by foreclosure is staggering. During
the past three years, more than 640,000 Californians have lost their
homes. With the number of homeowners who owe more than their home is
worth hovering at 30 percent, experts predict there will be many more
foreclosures in 2011 and 2012. Unless we take immediate, aggressive
action to assist these homeowners, any meaningful recovery in the
housing market and overall economy will continue to be delayed.
Tragically, only a fraction of those who face foreclosure will remain in
their homes when all is said and done. Those whose incomes and
financial circumstances meet strict guidelines may qualify for a loan
modification that will reduce their monthly payment to more affordable
levels. Yet the federal Home Affordable Modification Program (HAMP) is
expected to prevent only 700,000 to 800,000 foreclosures nationwide
before it expires at the end of 2012, and the program does little to
help those homeowners who are unemployed or otherwise no longer able to
meet their financial commitments. Their last hope is to sell their
home, which often means convincing their lender or the investor who
“owns” the loan (and, in many cases, the holder of a second mortgage
lien and the mortgage insurer) to accept a “short sale.”
With a short sale, homeowners with a proven hardship negotiate an
agreement to sell their home for less than the balance owed. Although
not every homeowner or mortgage is eligible, those who are able to
finalize a short sale avoid a foreclosure on their credit record and can
move on with their lives. Last year, 20 percent of home sales in our
state involved short sales.
Short sales can play an important role in our state’s economic recovery
by accelerating the pace of home sales and reducing the inventory of
bank-owned homes on the market. There are other benefits as well.
Homebuyers who can qualify for a mortgage at today’s low interest rates
also are able to purchase a home at below-market prices. Banks get a
nonperforming asset off their books and avoid the headaches associated
with disposing of assets they don’t want to own in the first place.
Neighborhoods have fewer abandoned homes, and local businesses have more
customers with money to spend.
Unfortunately, many homeowners are unable to successfully negotiate a
short sale. According to a recent survey of 2,150 California REALTORS®
who have assisted clients with a short sale, only three out of five
transactions closed – even when there was an interested and qualified
buyer.
What’s the problem? For one, no two mortgage agreements are the same,
so it can be difficult to standardize short sale processes and
procedures. Many homeowners have second mortgages, which further
complicate matters. Then there’s the challenge of convincing multiple
parties to take a financial loss or, in the case of loan servicers, to
forego fees they otherwise might earn during the course of the
foreclosure process. Poor and slow service by many banks and servicers
has only exacerbated the problem. Horror stories abound from potential
homebuyers and REALTORS® forced to wait 90 or more days for a response
to a purchase offer or being required to fax short sale applications or
other paperwork as many as 50 times. These delays discourage potential
homebuyers from considering a short sale purchase and undermine the
process for those who short sales are intended to benefit – the hundreds
of thousands of families facing foreclosure.
Increasing the
number of closed short sales by speeding up and streamlining the short
sale process is one important way we can help California families avoid
foreclosure and move our economy closer to recovery. That’s why the
California Association of REALTORS® is taking steps to enable more
families to arrange a short sale. Recently, we advocated for
improvements to short sale guidelines established under the federal Home
Affordable Foreclosure Alternative (HAFA) program. We’re meeting with
major banks, U.S. Treasury officials, government-sponsored entities
(including Fannie Mae and Freddie Mac), and others to urge them to
standardize processes, comply with federal guidelines, improve
communication with other stakeholders and increase staffing with the
goal of eliminating service issues. We’ve also offered our members
training in every aspect of the short sale process so they can assist
their clients.
But we can’t do it alone. That’s why we’re focusing the spotlight on
short sales and calling on regulators, elected officials, nonprofits,
business organizations, companies, and individuals with a stake in
California’s economic future to resolve this issue and others that get
in the way of a recovery. It won’t be easy, and some compromises will
be required. The important thing is that we need to act today. Our
families and our communities can’t wait any longer.
Sincerely,
Beth L. Peerce
President
CALIFORNIA ASSOCIATION OF REALTORS®