How to slow down the tide of foreclosures? Foreclosures lose banks lots of money (oh, no) and can ruin debtors credit scores (lives). Solution: offer financial incentives for a bank to accept a short sale (accepting less than the mortgage holder owes).
This is further 'intrusion' into the housing market: the Federal Government currently owns or backs 90% of all mortgages being written today, new buyers and some re-sellers can get between $6,500 and $8,000 tax credits, and (at least until March 31) mortgage rates are historically low.
The program will get more "owners" out of drowning debt and on to their new lives, and it may help reduce "shadow inventory." In the hardest hit foreclosure areas, it will prevent vacant homes and vandalism.
Details from David Streitfield The NYT:
Taking effect on April 5...Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.
Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”
Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.Read the entire article here.
One in 10 Virginia Mortgages Delinquent or in Foreclosure
So...The Homebuyer Tax Credit Costs A LOT Per House