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Kim Butler

Partners for Prosperity, Inc.

City:Mt. Enterprise

State: TX

I have 20+ years of handling alternative investments in cash, growth and income for clients nationwide.  I strive to help my clients with all things financial in every way possible over the phone and the web.  I own an alpaca farm which I enjoy working during my downtime.  I also enjoy gardening, writing and reading books.  I also train other advisors on Prosperity Economics.

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Housing Market Trends: Foreclosures Give Way to Short Sales

Industry expHousing Market expert predicts a surge in short sales as foreclosures continue to decline. What's behind the trend?

| BY Adriana Reyneri

In shifting housing market trends, foreclosure rates and delinquency rates for mortgage loans have fallen steadily since the beginning of the year, and industry experts predict a sharp increase in short sales for 2012.

Over the first quarter of 2012, the share of mortgages in foreclosure or behind by at least one payment hit a four-year low of 11.33 percent – down nearly 1 percent from the same time last year, according to a Mortgage Delinquency Survey released yesterday by the Mortgage Banker Association.

“Mortgage delinquencies normally fall during the first quarter of the year, but the declines we saw were even greater than the normal seasonal adjustments would predict, so delinquencies are clearly continuing to improve,” Michael Fratantoni, vice president of research and economics for the association, said in a statement.

Foreclosure activity has fallen steadily over the past six months, according to RealtyTrac, an online marketplace of foreclosure properties.  In April 2012, a total of 188,780 properties received a default notices, foreclosure auction notice or were repossessed by a bank.  The number stood at 230,678 in October of 2011.

RealtyTrac President Daren Blomquist predicts that short sales will surge in 2012, as delinquencies continue to decline and calls short sales an “elegant solution” to the foreclosure problem.  In a short sale, a distressed property is sold for less than what is owed on the mortgage and can be a win-win-win for banks, owners and buyers.  A short sale can afford banks the best price for a distressed asset, while at the same time freeing a homeowner from massive debt and providing a purchaser a more affordable price.

Pre-foreclosure sales – typically short sales – averaged about 89,500 per quarter from the second quarter of 2009 through the fourth quarter of 2011, according to RealtyTrac, but changing market conditions support a surge in short sales in 2012. A key factor is a $25 billion settlement announced in February between five of the nation’s largest banks, and the U.S. Department of Justice and attorneys general from 49 states. Among other provisions, the agreement imposes new mortgage servicing standards that make foreclosure a last resort. The settlement requires lenders to first consider other alternatives, such as loan modifications and short sales.

“Lenders may not be able to meet all the requirements set forth in these guidelines for a proper foreclosure, at least for a portion of the distressed loans in their portfolios,” said Blomquist in a recent blog. “That will make the short sale option look even more attractive to lenders going forward.”