Eanie, Meanie, Minie, Moe…Picking Government “Help” Programs

Westcoe Realtors, Riverside California…Please…before we begin…let’s make sure we all understand that the following is not a political message, or an anti-government rant.  This is a real estate blog, not a political one.  However, that does not mean that we don’t shake our head (continually, it seems) at some of the “help” our government has thrown our way the past 3 years…and now we are at it again. 

The latest program now touted by the government is, in general strokes, a program that is designed to make the banks more open to doing short sales on a timely basis.  As it stands now, a short sale (bank agrees to take less than owed on a property in lieu of foreclosure so the seller can sell) takes approximately 90-120 days to complete….and double that time if the lender is one of the huge ones buried in bad real estate loans.  Of course, by the end of this 4-6 months, many buyers have moved onto greener pastures and the whole process starts again.  turst us…short sales could frustrate Jobe.

So…this latest program from the Feds offers cash to a number of players in the short sale process…the seller, the bank, and the bank servicer to name a few…up to $1,500 we hear.  And all of this may be a good thing…we’ll see.  The catch is that certain procedures must be done in a limited time frame, because the goal is to speed up the short sale process…although it is hard to imagine a bank that is about to lose $100,000-250,000 really cares about $1,500…but as we said, we shall see.

So what is our problem with this?  The same as with almost all other government “help” programs that have been thrown our way the past few years….it all sounds good on the 15 second national TV sound bite, but the devil is in the details, and the details are usually all over the place.  We have had more government “help” programs thrown at us than insults thrown at Tiger or Jessie, and most programs usually turn out about the same….in a heap pile within months, replaced by the “new and improved” government help program.

That these programs usually get bogged down at trench level when they are implemented is no surprise to anyone who deals with the government on a regular basis.  But what is really irritating is that the entity in charge (Fed, treasury, whomever) makes these huge pronouncements, stirs up everyone’s hope, and then leaves the room, leaving everyone else to clean up the mess.  And by everyone, we mean the local real estate professional who is the main contact with sellers and buyers.

Examples from our past?  How about loan modifications programs.  There were numerous programs and pronouncements made by the White House itself (remember, this is not an Obama rant…could just have easily been done by a Republican President too), and yet by almost every measure out there, loan modifications have been so insignificant on a National basis as to be a joke.  But that didn’t stop the politicians of all persuasions from making pronouncements and promises.

How about foreclosure moratoriums…how did they do?  The goal with the moratoriums was to stave off the foreclosure for a few months to allow sellers and banks a chance to implement a better solution than foreclosure.  The result:  a complete mess with few compromises that only delayed the inevitable.  Oh…and a lot of angry homeowners who wanted to know how to implement these programs since their actual lenders had no clue what the details were to the program.  Sound familiar?

How about FNMA rent-backs by homeowners?  Loan balance forgiveness for over encumbered properties?  Perhaps the government program that allows for a refinance of up to 125% for certain properties (this one never worked with the banks)?  Automatic fixed rate loans for those people with adjustable mortgages.  How did any of these pan out?  Take a guess. 

It is ironic that the politicians stand at their pulpit mandating what lenders need to do for homeowners, when in reality, if the government had any real control over the banks, we might not be in this mess in the first place.  But that doesn’t stop the pronouncements…and the banks will probably simply continue on with business as usual.  As we said…we’ll see.

So…if you are a homeowner who is hearing of a new, special program where you can get money by participating in a short sale, and that this short sale process is now going to be streamlined, you might try taking all that with a grain of salt…because it has been our experience that there is a huge…HUGE…gap between what you hear on the news, and see with your bank.  A little patience will go a long way to helping you through this process.  Hopefully, we are wrong.  We’ll see.