This sort of stuff makes me shake my head.
See this article at AZCentral.com.
Recently, the federal government provided $269 million to the Arizona Department of Housing for the purpose of helping Arizona homeowners prevent foreclosure. The money was not used to reduce principal balances because, shockingly, the lenders would not agree to reduce loan balances.
So, recently the the Arizona Department of Housing comes up with a “brilliant” plan to use the money to pay for a short seller’s 3% closing costs in order to help short sales move forward instead of having the home lost through foreclosure.
What drives me crazy is that regardless of the program, the lender already does not want to foreclose and is generally willing to approve a short sale. As such, the lender is almost always willing to allow closing costs to be paid out of the sales proceeds thus reducing the net amount to the lender by an additional 3%.
If the lenders are more willing to approve short sales as opposed to foreclose and they are thus willing to reduce the net amount they receive by paying for the seller’s closing costs, why does the federal government need to step in and provide funds to essentially pay the closing costs?
This $269 million that is supposed to pay for the short seller’s closing costs will have the affect of allowing the lenders to net a greater percentage of the sales price from a short sale. Essentially, the $269 million is not helping the homeowners at all but rather, is going right into the pockets of the lenders.