| A recent stat shows that 23.3% of all US homes are | | | | give the default borrower a payment of about $250 |
| underwater, meaning that the owners of these | | | | for the next 20 years. |
| properties owe more on their home than what it is | | | | This is a good move by Bank of America, but the |
| actually worth. If these homeowners need to sell, | | | | problem is that for borrowers like the one in this |
| they generally have to with Short Sales. Unless they | | | | example, this makes the short sell less desirable than |
| have reserves of Cash stashed away, which thy | | | | than just letting the home foreclose. At this point the |
| usually don't, this is about the only option to avoid a | | | | borrowers credit is already shot, and the only thing |
| foreclosure. | | | | they would be saving is the term "foreclosure" on their |
| Mortgage Insurance was created to insure banks | | | | already shot credit. Is it worth $55,000 to avoid that |
| losses from default home loans. However, the | | | | term? Not for these borrowers. |
| Mortgage Insurance providers are going out of | | | | From Bank of Americas standpoint, by not approving |
| business because they never anticipated losses would | | | | the short sale they are going to lose even more |
| be this extreme. They can't cover the damage of all | | | | money by having to pay the legal fees associated |
| of the US loans in default. | | | | with foreclosure. Then, after the foreclosure, they still |
| In effort too salvage some money, and make up for | | | | have to sell the house at a price that is nowhere near |
| the lack of funds covered by mortgage insurance, | | | | worth what the owners borrowed against it. |
| Bank of America is attempting to collect promissory | | | | While it is a good move to try and make the default |
| notes from the owners requesting short sales. One | | | | borrowers more accountable, they have to do it in a |
| real estate agent I know is working with a client who | | | | way that will actually make sense. In most cases, |
| owes more than $300,000 on a house. They currently | | | | making the guidelines too strict will just make things |
| have a short sale offer on it for $200,000. The bank is | | | | worse for all parties involved and will simply result in |
| willing to approve the short sale, IF the owner will sign | | | | more wasted time and more foreclosures. |
| a 20 year promissory note for $55,000. This would | | | | |