By Mike Colpitts
Homeowners are receiving cooperation from banks and mortgage lenders to sell their unaffordable homes as short sales at higher levels. The increase in short sales is being driven by investors calling for banks to cut their losses, resulting in a reduction of homeowners walking away from their home mortgages.
Scam artists preying on homeowners at risk of foreclosure are increasingly being arrested and prosecuted as federal authorities crack down on the scammers. Companies that collect fees in advance of providing services for short sales or promising to halt foreclosures are almost always conducting business illegally.
The economy has produced a massive increase in the volume of fraud cases involving agents using tactics to cheat homeowners. But a movement is developing in the mortgage industry to increase the number of short sales and slash the volume of foreclosures.
Default notices were filed for the first time on 58,362 residential properties in January across the U.S., representing a 22% decline from a year ago, according to RealtyTrac. The drop provides clear evidence that banks and mortgage firms are working with consumers more closely to cut their losses and increase the volume of short sales. Lenders cut the principal amount owed on home mortgages in order to sell properties to a new purchaser through a short sale.
Despite the increase in banks cooperating directly with homeowners in default of their mortgages, scammers are still working to collect fees for short sale services they rarely deliver.
“The simplest and most common type of short sale scam occurs when a short sale agent offers to provide their services to the homeowner for a fee,” said Lee Wasser founder of Short Sale Center.net. “One of our company’s main goals is to spread the word that these kinds of companies are taking advantage of homeowners when they are most vulnerable.”
In normal circumstances, real estate agents offer listing services to consumers and work with the mortgage holders’ lender to market the property at a discounted price. Short sales have historically taken months to achieve, and often last more than a year, driving the majority of potential home buyers away before a transaction can be closed. But the speed at which short sales are closing seems to be improving, according to real estate agents who specialize in short sales.
Cooperative short sales could provide part of the prescription for a national housing recovery. Selling homes before they are formally foreclosed aids neighborhoods suffering through the foreclosure crisis, and helps to stabilize property values and usually obtain higher home prices than on foreclosed properties.