Death of the Short Sale

I was asked just yesterday whether or not I thought the government bailout of the mortgage banking industry would put a end to short sales. My answer was unfortunately, no. The $700 billion initial proposal has already been scaled back, and we are now seeing some of that bailout that was intended for banks and ultimately home owners, now potentially going to the auto industry. In an ideal situation, the money would flow into the banking system, allowing banks to loosen lending guidelines and proactively and aggressively modify as many mortgages as possible, slowing foreclosures and ending short sales. Although short sales have been an important part of weeding out foreclosures and ultimately stabilizing the housing market, there has been a greed factor that has put additional and unnecessary strain on the housing market. The greed factor happens when seasoned professionals turn larger profits in a short sale scenario when others, banks and home owners, suffer the greatest losses. I anticipate big changes in the first quarter of 2009. The new administration has the ability to radically effect our current housing and banking meltdown. Regardless of what side of the fence you are on, hope that they get it right. You will be affected.

What about Me

With the election only hours away, I sit and reflect on which one of these candidates will be better for my business. Selfish maybe; but if my business is going good, people are buying houses and we are lowering homeowner interest rates. Home prices are stabilizing, maybe even appreciating. My business is good for the country. It is what it is. Right McCain? Right Obama?

McCain's history states he would be good for deregulation of big banks and the lenders who fund my loans. This is appealing because the industry has over reacted and tightened up far too much. The government has taken control over Fannie Mae and Freddie Mac. The government has seized Washington Mutual and Wachovia. Stated income loans have been banned and down payment assistance has been abolished. What's next? Certainly McCain cannot be in favor of such "big" government intervention. Maybe McCain as President of the United States would ease governments control over Fannie and Freddie, loosen lending guidelines and let us get back to free market capitalism. That would certainly be good for business; although isn't that what help caused the mortgage meltdown?

Obama is all about the "little" guy; Middle class America. Obama would potentially tax the wealthy at higher rates, and maybe pass that on to the middle class by adding some tax incentives when buying or selling a home. I need not worry about the other tax breaks if it does not encourage people with little or no down payment to purchase a home. Obama would likely help bring back down payment assistance, regardless of the higher default rate. If the borrower can't make the payment, the government can with the additional money it is collecting by taxing the rich; and we are not talking about plumber rich.

So tomorrow it will all be decided. The question is, what will the next President of the United States do? Capitalism allows for free markets, and for free choice. It allows me to make loans to those that in good faith can pay them back. Deregulation gets the government out of private enterprise, and allows for people to make their own decisions. Going above and beyond to help the less fortunate, the middle and lower classes of the economic food chain, the ability to better live the American dream of home ownership. When did both concepts become so separated, so completely removed from one another. The mortgage industry cherishes both ideologies; doesn't America? So whoever is the next President, deregulate the mortgage industry and bring back down payment assistance. With the increase of volume of mortgages being funded, I can get rich. Then tax me more to help pay for the increase in defaulting loans. If I am rich, I will gladly pay more to help the middle class buy houses they may not otherwise be able to afford.