The latest chapter from the housing bust saga…. Check out this Washington Post article…
A new wave of distressed home sales is rippling, more quietly this time, through American cities and suburbs.
Its unsettling effects are playing out here in Manassas, along Brewer Creek Place, a modest, horseshoe-shaped street lined with 98 brick townhouses. Several years after the U.S. foreclosure crisis erupted, the U-Hauls are back.
The last time, banks seized nearly every fourth house on the street through foreclosure. This time, homeowners are going another route: a short sale.
“I love this house, but I just have to leave,” said Leanna Harris, 27, the owner of a corner unit that used to be the builder’s model, with a stone path in the yard and a gourmet kitchen. “I’m at peace with it now.”
The original owner bought the home for $400,714 in 2006; Harris and her husband, both bartenders, paid what seemed to be a bargain price, $289,000, in 2008. But they have fallen behind on their mortgage payments, in part because her husband was out of work. Now they have a $246,000 offer for the home, and the balance on their mortgage is more than that. They want to accept the offer. All they need is their bank’s okay.
That kind of deal is called a short sale, and it’s sweeping the country. In these deals, a lender allows a troubled borrower to sell a home for less than what’s owed on the mortgage.
Completed short sales have more than tripled since 2008, and 400,000 of these deals are projected to close this year, according to mortgage research firm CoreLogic. The giant mortgage financier Fannie Mae approved short sales on 36,534 home loans it owned in the first half of the year, nearly triple the number in 2007 and 2008 combined. Freddie Mac, its sister company, approved 22,117 in the first half of 2010, up from a mere 94 in the first half of 2007.
Distressed homeowners are being drawn to short sales in large part because they can help protect a borrower’s credit rating and thus the chance of buying another home later on.
“I worked hard for a long time to keep my credit score close to perfect, and I know a foreclosure would be much worse for my credit than a short sale,” said Harris, who listed her Brewer Creek Place home as a short sale about a month ago. “If there’s a chance we can avoid foreclosure, we’d rather do that.”