Economic Focus

ANOTHER LOOK AT SHORT SALES

There is another dramatic shift in home sales, according to Ron Peltier, chairman and chief executive officer of HomeServices of America Inc., the second-biggest U.S. residential brokerage which has over 700 offices under the Coldwell Banker brand. That dramatic shift is in banks willingness to sell than the mortgage balance to avoid foreclosing. Finally, common sense is coming into the equation.! Typically short sales sell at a discount of about 20% for home not in financial distress, in contrast to a 40% discount for bank-owned homes also known as REOs. That is of 20% more for the mortgage holder, so it is a clear financial incentive for banks to accommodate a short sale over having to process a foreclosure. HomeServices reports that the distressed sales were a mix of 60% foreclosure and 40% short sales. But that ratio has now flipped. Why Banks Should Short Sell: Following the Robo-Signing and subsequent delays in the foreclosure process, banks are facing the realities of how to dispose of these assets, which in fact become a liability to them: First, banks do not want to be landlords, they are in the business of lending on not acquiring real estate. There is increasing pressure on banks to hold and rent-out these properties so as not to flood the housing market with for sale inventory and further drive down values and selling prices. This is a policy that Fannie Mae and Freddie Mac are exploring for the same reasons and collectively that would place an enormous inventory of rental homes on the market. This would bring another wave of income loss and uncertainty further prolonging a housing market recovery. Short Sales Benefit All: Mortgage lenders recover more money - With either a short sale or foreclosure the bank stands to lose money. It makes so much more sense to negotiate the short sale with a 20% discount than to push RELEASE DATE Mon 10/17 9:15 am et Tue 10/18 8:30 am et Tue 10/18 1:00 pm et Wed 10/19 7:00 am et Wed 10/19 8:30 am et Wed 10/19 8:30 am et Wed 10/19 2:00 am et Thu 10/20 8:30 am et Thu 10/20 10:00 am et Thu 10/20 10:00 am et Thu 10/20 10:00 am et
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for the week of October 17, 2011 Volume 15, Issue 40

Key Economic Reports Released This Week
ECONOMIC INDICATORS RELEASED BY Federal Reserve Board Bur. of Labor Statistics Department of Labor National Association of Home Builders Mortgage Bankers Association of America Bur. of Labor Statistics Department of Labor Bureau of the Census Dept. of Commerce Federal Reserve Board Bur. of Labor Statistics Department of Labor Bur. of Econ. Analysis Dept. of Commerce National Association of Realtors Federal Reserve Bank of Philadelphia CONSENSUS SURVEY1 IP 0.3% CU 77.5% 0.3% core 0.2 15 N/A 0.3% core 0.2% 590k N/A 405k 0.2% 4.90M -9.0% Wt. *** *** * * *** *** ** * ** ** ** INFLUENCE ON INTEREST RATES

Ind Production / Cap Utilization for September 11 Producer Price Index for September 11 NAHB Housing Index for September 11 MBA Mtg Apps Survey for week ending 10/14 Consumer Price Index for September 11 Housing Starts / Bldg Permits for September 11 Beige Book Jobless Claims for week ending 10/15 Leading Economic Indicators for September 11 Existing Home Sales for September 11 Philadelphia Fed Survey for October 11

If above consensus If below consensus If above consensus If below consensus

Undetermined Undetermined

If above consensus If below consensus If above consensus If below consensus

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If above consensus If below consensus If above consensus If below consensus If above consensus If below consensus
Undetermined

Survey courtesy of Insight Economics, LLC

* Low Importance ** Moderate Importance *** Important **** Very Important

through a foreclosure and take 40% discount in a less predictable market. The housing market will be less damaged - Either way the market has to absorb this inventory before it can normalize. Short sales will better stabilize market values and sales prices and transaction time. Short sales will benefit the lenders, the homeowners, home values, selling prices, and finally it will benefit the housing industry as a whole including real estate and lending professionals. Short sales over foreclosures benefit the entire economy.
Jessica Lombardo Loan Officer Hi-Tech Mortgage 2184 McCulloch Boulevard, # A Lake Havasu City, AZ 86403 jessica@hi-techmortgage.com Office: 866.768.5626 Cell: 916.548.8533 Fax: 916.372.2518