Although the Obama administration continues to search for a solution for homeowners facing foreclosure, the reality of the situation is only about 4 percent of these at-risk homeowners receive long-term mortgage help, according to a recent report by CNN.
Nearly 2 million housing units in the Unites States are in foreclosure or are bank-owned, and more are expected to follow, RealtyTrac said. Citigroup experts say the government's current solutions have been ineffective at keeping people in their homes, and they anticipate lenders could foreclose on another 8 million loans as the economy worsens.
With foreclosures on the rise, homeowners are looking for a viable solution to their problems. Housing Assist of America, a real estate company specializing in short sales, said when comparing short sales to foreclosures, short sales are clearly the better route. According to the National Association of Realtors, almost 500,000 transactions in 2009 were short sales, representing almost 10 percent of all home sales.
Banks are beginning to go along with short sales in increasing numbers, three years into a U.S. housing slump that pushed the economy into a recession and cut resale values by 30 percent from the peak in July 2006, a recent article on Bloomberg.com said. According to the article, short sales almost tripled to 40,000 in the first six months of 2009, compared to the same months in 2008. However, in the first half of 2009, there were 25 foreclosures started or completed for each short sale transaction, according to data from the Office of Thrift Supervision and the Office of the Comptroller of the Currency.
""It's really finally dawning on banks that they're better off with a short sale,"" said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles. ""I think banks were in denial.""
The Obama administration is also advocating short sales as an alternative to foreclosure. As DSNews.com reported, the Treasury Department recently laid out finalized guidelines for carrying out short sales under the Making Homes Affordable program. Under the Home Affordable Foreclosure Alternative (HAFA) program, the administration is urging participating servicers to follow through with short sales as an alternative to foreclosure for homeowners who do not qualify for a modification under the Home Affordable Modification Program (HAMP).