Apr 17, 2012 18:15 EDT Short sales have are no longer a pie-in-the-sky dream for distressed underwater borrowers, and numbers from Lender Processing Services prove it.
Short sales pick up in housing market - USA TodayApr 20, 2012 09:40 EDT
By Julie Schmit, USA TODAY
Short sales outnumbered foreclosure sales in 12 states in January, indicating that more homeowners are finding an easier way out of a distressed home loan.
By Phillip Spears, Getty Images file
Short sales — which occur when a lender agrees to a home sale for less than what's owed — were up 33% in January year-over-year, and preliminary February numbers also look strong, according to market researcher RealtyTrac.
Its data underscore lenders' increased willingness to do short sales, which tend to harm neighborhoods less than foreclosures. Homeowners also may regain eligibility for a new mortgage sooner than those who go through foreclosure.
More short sales "is mostly a good thing," says Ira Rheingold, of the National Association of Consumer Advocates. One concern is that homeowners may have to short sell after being denied loan modifications that would have enabled them to stay in homes, he says.
RealtyTrac says foreclosure sales, which occur after a bank has repossessed a property, still outnumber short sales nationwide but the gap is closing.
Earlier this week, Bloomberg News reported that data from mortgage tracker Lender Processing Services show short sales surpassed foreclosures in January for the first time.
RealtyTrac's data shows that occurred in key states at the forefront of the housing downturn, including California, Arizona, Florida and nine others.
Lenders are pricing short sales more aggressively, RealtyTrac adds. In January, the average short sale price was 10% lower than a year earlier, exceeding the drop in U.S.home prices.
Some mortgage servicers started pursuing short sales more aggressively months ago. Bank of America says it did 107,000 short sales last year, up from 92,000 in 2010 and double the 2009 volume.
New measures are also likely to boost short sales.
Freddie Mac and Fannie Mae, which own or guarantee 60% of home loans, will soon require lenders to decide short sale offers within 60 days. Realtors have complained that short sale offers often linger. The recent $25 billion mortgage settlement also encourages short sales.
New rules have slowed foreclosures in many states, increasing short sales, says Florida foreclosure defense attorney Roy Oppenheim.