Freddie CEO Says Short Sales Up 600%

According to the CEO of government owned lender, Freddie Mac, short sales are up over 600%. Ed Haldeman, CEO of the beleaguered company has said that the company is using “last-minute” efforts to save as many homeowners as they possibly can. These efforts have been stepped up to usage by as many as seven times as much as the first housing market problems just two years ago.
Freddie Mac has been learning to take short sales on the properties that they own because they cost less to the bank and the consumer. They are also faster to process and require thousands of dollars less to be spent on costly legal bills by both parties. While there is still a penalty to both sides of the agreement, it does not damage both so that they cannot function anymore. The bank is left with an asset, which they may or may not have a deficiency balance in. The former owner is left with the deficiency balance and a ding on their credit report. Unlike a foreclosure, the ding on the owners credit report is not nearly as bad and can be recovered from in three to four years even though it remains on their credit report for the entire seven year period.
“The undisputable fact is that everybody wins when foreclosures are prevented,” Haldeman said in a statement released on Monday.

The last ditch efforts that Freddie Mac and other lenders have been using are necessary to save them and home owners. However, it does not help housing prices recover from their historically rock bottom lows. The deed in lieu procedures where an individual hands the house over to the bank and wipes out most of their mortgage debt causes the house to drop in value. Also, banks are not always able to sell the house for as much as they bought it for, which leaves them on the line for the difference in the price. The problem is a simple supply and demand economics lesson. There is more supply so buyers can choose what they want to pay as the demand is not as great as the amount of the supply.
Foreclosure is even worse on a home and a community.
Many communities that have a large number of foreclosed houses have an increase in crime because the homes become abandoned and useless. They become havens for drug users, street criminals and vandals. There has been an effort made to drive out vandals from these areas but it takes time as well as money that many areas simply do not have. For example, Nevada had one in 31 households receive a foreclosure in the 1st quarter of 2010. This is double the national average of one in 80.
There are simply not enough police officers to patrol the areas that have a large number of foreclosed homes. The government has been using Freddie Mac and its sister company, Fannie Mae (FNM) as important tools in the housing recovery effort. Thanks to government control they have been able to pump unlimited relief into the housing market.