Short sales and loan modifications have been on the rise this year in the wake of the massive mortgage settlement but each are having quite a different impact on the housing market.
A new report shows that a large portion of the mortgage settlement has gone to aid in the form of short sales. This is particularly true for San Diego real estate and California as a whole reports around two thirds of credits in the state, or around $6 billion has been through short sales.
Some would definitely argue that this shouldn’t really be counted as helped or credited to banks as part of the mortgage settlement as they would have really needed to approve these short sales anyway. Still short sales have been selling for more than other forms of distressed properties, helping the housing market to heal and improve.
Of course there is some concern that short sales could evaporate at the beginning of 2013 when cash back incentives and tax breaks end, reducing the appeal to homeowners to complete them. This could create more foreclosures and see more properties flowing through the process to become bank owned REOs.
Loan modifications have been a true blessing for many homeowners who have desperately wanted to stay in their homes. While modifications have been becoming more significant many have not proven to be a lasting fix.
Re-default rates on some loan modifications have been as high as 80%, within 12 months according to Bloomberg News, resulting in these properties coming back to the market as foreclosures. Sadly, many might say that this was the intention of lenders and some banks that have been far less than happy about helping non-payers. This is still some sort of win for them as they received multiple credits for modifications, even in cases where they put borrowers back into inferior loan terms and are now able to sell those properties for more money. Perhaps the one main exception to this is those homeowners who had attorneys helping them battle the banks and where private loan modifications offered by real estate investors who purchased the mortgage notes on their properties.
So the foreclosure mess may not quite be over yet but properties in most areas are being absorbed fast enough that it won’t hold back the recovery and instead only offer more welcome bargains to investors and home buyers.
