As a Phoenix short sale agent, I keep my ear to the ground, listening carefully for the sound of common sense solutions that will actually help the housing recovery take place. Unfortunately, common sense is in short supply, drowned out by the noise of “do something – anything” solutions that wind up doing more harm than good.
Before we can even begin to talk about what role the government can play in the housing recovery – and the role they should be playing – it’s crucial that we remind government officials of their stated goal: to keep homeowners in their homes whenever possible. Do Fannie Mae & Freddie Mac rules help homeowners – or someone else?
Fannie Mae & Freddie Mac Fining Lenders Who Don’t Foreclose Quickly
When homeowners are facing an impending foreclosure, they’re under the gun to find a way of stopping that foreclosure train. Sometimes they’re able to refinance, sell their home through a short sale or go through one of the other foreclosure avoidance processes available in today’s Phoenix housing market. The problem? Lenders who drag their feet in the foreclosure process are fined by Fannie Mae & Freddie Mac for not pushing homeowners out into the street. As of November/2011, BofA has paid Fannie & Freddie $1.3 Billion in fines for "not foreclosing in a timely manner". How does this policy keep homeowners in their homes – especially when foreclosure avoidance takes time?
Government Loving Homeowners From “Arm’s Length”
If you’re behind on your mortgage payments, don’t look for your government to give you a big, warm hug, pat you on the head and tell you that they’ll do what they can to keep you in your home. They actually want to keep you at arm’s length. Here’s what I mean: Federal housing rules require “arm’s length” transactions in short sales, meaning you can’t know or have an unapproved business relationship with the person or company buying your home with a short sale.
Until recently, many people facing foreclosure would find a short sale buyer (friend, relative, etc.) then rent the home from that buyer once the sale was complete. The former homeowner stayed in their house, the buyer profits, everybody’s happy, right?
Not according to the government.
Supposedly worried about fraud, the government imposed these arm’s length rules. Now, homeowners who could stay in their homes are forced into the street, just so the buyer of the property can rent the property to somebody else – after it sits empty for a period of time (depriving the new owner of income, reducing property values and inviting criminal activity). The average person seeking Phoenix short sale solutions isn’t trying to rip off anyone. They’re simply looking for ways to avoid foreclosure. If they can find a way to avoid foreclosure and remain in their home, most homeowners are interested.
These rules aren’t stopping fraud – con artists won’t let a little thing like laws get in the way of breaking the law – but they do force government to violate their own operational Prime Directive, which is to keep homeowners in their own homes whenever possible.
As a busy Phoenix short sale agent, I can tell you that many homeowners would jump at the chance to sign their houses over to interested third parties, or even to their lenders, if it meant they get to keep living in their homes. Imagine not having to rip kids out of school mid-year, leaving a perfectly good house to sit empty, eroding the value of neighboring homes.
We’re From the Government and We’re Here to…
Remember how I said Fannie Mae & Freddie Mac doesn’t allow a homeowner to rent from their lender (or anyone they’re related to or that they know) if they give up ownership of their home? These rules apparently don’t apply to Fannie Mae, Freddie Mac and FHA – or they won’t in the near future. There’s a plan in place that would allow them to violate their own rules, and allow homeowners to rent from the federal agency that takes their foreclosed property.
What’s the difference between renting from your lender or the government? As long as your personal housing crisis is solved, what do you care? Why should the government? What makes these government-related entities more qualified to look out for the best interests of homeowners than private lenders? Is it because they don’t have a profit motive? Is it something else? And if government is suddenly so concerned with keeping people in their homes, why do their policies require lenders to force homeowners out of their homes?
The best argument government can come up with for banning lenders and private businesses from buying Phoenix short sale properties and renting them back to the former owner is that government bureaucrats are good landlords. That must be it. Government gave us public housing. And that worked out splendidly, right? OK, bad example!
I think it’s wrong for the government to slap homeowners into the street with bad policies for most types of mortgage loans, and then come riding in on their magical horses to scoop certain people up, rescuing them from the mess that government policies helped create… but only if your loan is owned or serviced by Fannie Mae or Freddie Mac.
Government needs to decide who they’re supposed to be helping – homeowners or someone else? If it’s homeowners, they need to take a good hard look at how these policies impact lives, families, neighborhoods and futures. And if government isn’t interested in helping people stay in their homes, drop the charade. People who need foreclosure avoidance help in Phoenix deserve better.
People in Phoenix need to be able to find a short sale agent who can help them move beyond their immediate need to avoid foreclosure. Changing the rules in a way that helps desperate homeowners will be a good start. As a Phoenix short sale agent, I’m committed to speaking out for common sense rules that help people stay in their homes while avoiding foreclosure. A good path forward is to let homeowners that want to rent – to do so, if a possible buyer or lender are interested. It just makes sense.
What do you think?