Monday, February 1, 2010

A Cramdown by Any Other Name ...

I'm not sure who takes the haircut on this, but in Las Vegas, which is ground zero for housing, foreclosures are down while short sales have skyrocketed. A short sale isn't quite as borrower-friendly a cramdown—the borrower has to find a new place to live—but in the end the bank usually takes a loss, and the home ends up occupied, cutting down on foreclosure blight. The track record for loan modifications so far has been terrible. Most modified loans end up going right back into distress, which is why banks haven't been interested in expanding them. Short sales may be a decent way out; replace the now-underwater and possibly out-of-work household with someone who meets today's more rigorous lending standards.

(photo by flickr user sean drelinger)

3 comments:

ShortWoman said...

I am a Realtor in Vegas. Yes, we have more short sale listings than bank-owned listings right now. BUT it's still hard to get those short sales approved. For some months now we have had over 8000 contingent short sales -- that means the seller has accepted an offer but the bank hasn't approved it yet. Last week that number topped 9000. Yet only about 600 a month are closing. Assuming all of them are approved, it will take well over a year to clear them out. In reality, many of them will be foreclosed upon.

Nicholas Beaudrot said...

That's good information!

What's a typical number of closings for a month of the Vegas RE market?

ShortWoman said...

Well, for the last 6 months or so, it's been 3000-4000. Subject to change without notice, of course. Every Friday I post the latest market data on my site, available for anyone who needs accurate data.