Housing: Treasury to pay servicers and homeowners to do short sales

From the radical to the sublime, or the sublimely stupid. Are we in the Twilight Zone or what? I dunno anymore. If these yahoos cannot get the servicers to do meaningful mods, then at this point why the hell not pay people to leave their homes and pay servicers to do their fiduciary DUTY by allowing a short sale@@?!!@@ Off The Rails. And they think servicers will do MORE mods when they can get paid another fee to do short sales where they already make money?

What a clusterfxck this whole thing has been and continues to be. HOLC DAMMIT! We would have bought these houses ONCE. Now we are paying and paying and paying. When FAN FRED FHA have to write these loans down taxpayers will pay yet again for these same houses.

I mean talk about moral hazard. It is a moral hazard to buy the loans directly through HOLC once, when we own FAN FRED anyway, but it is not moral hazard to pay people to leave their homes and loans? And to keep interfering in the market so it does not correct? If we bought them, once, we would be done in one fell swoop. This endless tinkering is what leads to market uncertainty and lack of capital investment.

But by all means let’s BS around the sanctity of the contract. Who are they kidding? No contract has been protected since Chrysler bondholders got screwed and we all know it. We are paying for these losses ANYWAY as all these loans are now owned by FANNIE and FREDDIE and increasingly, FHA.

WE the taxpayers are ALREADY the damned owners. When the short sales go through WE the taxpayers will take the loss via FAN FRED and have to send them MORE money. Why not leave the people in their houses if we have to pay for losses anyway? But nooooo then the banks.servicers couldn’t get nice fees right? frakkers. sigh.

WSJ:

Under the plan, borrowers will receive $1,500 from the government if they sell their homes for less than the amount of their mortgages. Mortgage-servicing companies will also receive $1,000 for each completed short sale. The program is open to borrowers who may be eligible for the government’s loan-modification program, but don’t end up qualifying, or are delinquent on their modification, or request a short sale or deed-in-lieu transaction.

The short-sale program is the latest addition to the Obama administration’s $75 billion foreclosure-prevention plan, which includes incentives for mortgage companies and investors to rework troubled loans. The government first said in May that it would include short sales in the program, but it has taken months to finalize the details.

Under the new guidelines, second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first mortgages, meanwhile, can collect up to $1,000 from the government for allowing such payments.

Borrowers who complete a short sale under the program must be “fully released” from future liability for the debt, according to the guidelines…

That ‘fully released’ is key. In recourse states homeowners are liable for the difference between the short sale and the loan balance on the mortgage. But this guideline will release people from that debt. Also the IRS has a nifty habit of coming after people for taxable income on that difference. However there is a loophole there…

WSJ:

The Internal Revenue Service counts debt forgiveness–the difference between the home’s sale price and the amount owed on the mortgage–as regular income, although there are exceptions for bankruptcy, insolvency, forgiven deductible mortgage interest and seller-financed debt. You also cannot deduct losses from price declines, or expenses you incur for real estate brokers, attorneys or others involved in the sale. Primary homeowners, however, get a break from being taxed on the shortfall, at least until December 31, 2012, thanks to the Mortgage Forgiveness Debt Relief Act of 2007…

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December 1, 2009. Tags: , , , , , , , , , , , , , . Economy, Finance, Foreclosures, Housing, Obama Administration, Politics, TARP, Taxes, Unemployment Statistics, Wall St.

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