Become a renter of your current home
August 3, 2010
The downfall of the housing markets has forced the nations largest loan service companies to borrow billions of dollars from the U.S. government and taxpayers. The major challenge that is facing the real estate market is the continued escalation of foreclosed properties. Over the past two year home foreclosures have jumped to nearly one out of every ten homes in a number of major metropolitan cities, and the long standing goal of home ownership has eroded.
Home foreclosures have a devastating impact on the market as these properties tend to sell for twenty five to fifty percent less that comparable homes in the neighborhood. The surge in home foreclosures has significantly impacted real estate values as a whole and over the past twelve months the median sales price for homes has declined by over ten percent. The government has attempted to slow down this process through the making home affordable loan modification program and streamlined refinance loans, but these measures have yet to show a meaningful impact. The large challenge that the market faces is the lack of motivation for homeowners to keep their present homes. Home owners who are upside down on their mortgage loans by tens or hundreds of thousands of dollars have simply chosen to walk away from their properties, further compounding the pricing epidemic.
Fannie Mae, the nations largest loan servicing company (a company that buys mortgage back securities from lenders) has recently announced a pilot program aimed at slowing down the foreclosure epidemic. The new program enables a borrower to simply pursue a deed in lie of their property, while contractually signing a lease agreement to stay in the home. The process benefits the homeowner who is not forced to move and often receives a significantly lower house payment as well as Fannie Mae and the lender who continue to receive cash flow and are not forced to unload another property below market values. The lease agreements are typically in place for over one year and provide both the borrower and lender a short term solution to the foreclosure epidemic. The overall housing markets benefit from reduced home foreclosures on the market, helping to reduce inventory and bring price stabilization to the market. The real estate market has benefitted this year from the governments tax rebates and historically low interest rates, but sales are well below levels of 2006 & 2007 and are likely to remain low through 2010. Eliminating excess inventory is a great way to help stabilize prices and provide a short term solution that benefits all parties.
