Backed by a $3 million war chest from the NATIONAL ASSOCIATION OF REALTORS®, real estate agents around the country have come up with a variety of ideas for curtailing the economic effects of foreclosure in their local markets.
They’re volunteering as foreclosure counselors, running vacant property tours, seeking training to better serve clients in foreclosure, and teaching financially struggling homeowners how to “buy time” from mortgage lenders. In addition, they’re pushing federal regulators and legislators to speed up the short-sale process.
Volunteer foreclosure counselors
The Orange County Association of REALTORS® in California has trained more than 300 REALTORS® to serve as foreclosure counselor volunteers.
Working in collaboration with nonprofits, government leaders, and industry and advocacy organizations, the Orange County REALTORS® volunteer at foreclosure-prevention workshops. The ongoing effort has already helped nearly 10,000 homeowners.
REALTORS® from Virginia’s Eastern Shore held a seminar where homebuyers in foreclosure learned how to talk with their banks to buy themselves time.
“Banks will work with you if you know how to talk to them,” says Eastern Shore Association of REALTORS® Executive Officer Laura Flournoy. “Many people are losing their homes today because they don’t know how to write letters to the bank.”
In St. Paul and Minneapolis, Minn., REALTORS® focused on reducing the inventory of unsold vacant homes by conducting tours of foreclosed homes, short-sale homes, and other vacant homes.
The St. Paul “Welcome Home” tour featured open houses on two weekends in four neighborhoods with high foreclosure rates. It highlighted nearby amenities and the value of investing in the communities through homeownership.
The North Metro REALTORS® Association just outside Minneapolis organized a series of single-day, open house events featuring an average of 150 properties, including foreclosures and short sales, on the market in four communities hit hard by foreclosures.
“Within a week a dozen of the homes had sold, and a year later we’re still hearing from REALTORS® about sales they closed with buyers who attended one of those open houses,” said Eric Myers, government affairs director for the North Metro association.
Participating communities pitched in by promoting the tour and local amenities including newly available commuter rail service and by providing information on downpayment assistance for homebuyers.
REALTOR® short sales and foreclosure certification
REALTORS® aren’t just educating homeowners, they’re also educating themselves about foreclosure and short-sale processes by earning the National Association’s Short Sales and Foreclosure Resource (SFR) certification.
The designation confirms a REALTOR® can help a homeowner maneuver through the complexities of short sales as well as help buyers pursue short-sale and foreclosure opportunities.
NAR pushes banks for answers to the foreclosure crisis
At the national level, NAR has worked to make the short-sale process run faster and more smoothly. In a short sale, the lender agrees to let the homeowner sell a property for less than what’s owed on the mortgage.
Short sales are an important part of the federal government’s Home Affordable Foreclosure Alternatives program, and NAR pushed the federal government to include key consumer protections and benefits in the HAFA program.
One of the benefits is that lenders using HAFA now must respond within 10 days to home-purchase contracts. Based on what REALTORS® in markets around the country have reported, some banks take months to respond to offers on short-sale or foreclosure properties.
Second mortgage solution
Although the new HAFA process should help speed up short sales, there could still be problems negotiating some deals, according to Anthony Hutchinson, senior policy representative for NAR.
Many of the homeowners who want to do short sales have more than one mortgage loan. Because second mortgage lenders get paid only if there are sales proceeds left after the first mortgage is paid off, they aren’t keen to OK a short sale. “The real challenges lie with second mortgage holders who don’t see the advantage of doing a short sale,” he says.
The new HAFA program would set aside 6%, or up to $6,000, of the sale proceeds for second mortgage lenders that agree to a short sale. “If the property goes into foreclosure instead of becoming a short sale, the second mortgage lender will likely get zero and the homeowner would lose his home,” Hutchinson says.
In addition, NAR successfully lobbied to stop banks from requiring foreclosed homeowners using HAFA to repay the difference between the sales price and the amount still owed on the home’s mortgages after the short sale closes. However, that break on repayment won’t apply to short sales that take place outside HAFA, unless homeowners specifically negotiate that benefit for themselves.
“That’s important because, in some states, mortgage lenders can come after the homeowner for that money years after the short sale,” says Hutchinson. “In fact, some mortgage lenders are already selling those debts to collection agencies and more may do so in the future.”