As 11.4% of homes in America sit vacant, the government and those within the housing market scrounge for a solution for the growing financial crisis. According to the Census Bureau, the rate of empty houses in America continues to rise, with Maine having the highest proportion of vacant houses, at 22.8%. As the national number of residential vacant properties continues to rise, an additional downward stress is forced on home prices. So, what is the solution?
John R. Talbott, an American Finance expert suggests in his latest article How Obama Can Fix the Housing Market and the Economy, government involvement with a 3% fixed thirty-year mortgage rate may encourage growth within the housing market. Talbott states, “The government should step in and offer a 3% fixed-rate thirty-year mortgage to any person, regardless of credit worthiness or delinquency history.”
The downside to Talbott’s suggested solution to the weakened housing market is that it relies on yet another government sponsored loan modification program such as Home Affordable Modification Program (HAMP). The implementation of HAMP by the federal government was an ideal attempt at saving the housing market with the goal of aiding over 3 to 4 million financially struggling homeowners avoids foreclosure but proved to be unsuccessful for its failure to offer enough incentives for the average lender to modify a loan. With another suggested loan modification program, one can only assume, it once again will fail the American people.
The people of America do not need another failed governmental attempt at offering a loan modification program. They need to be educated on the options of a short sale. A short sale occurs when a homeowner cannot make their mortgage payments and rather then become extremely delinquent on loans, decides to sell their property for less then the balance owed.
Far too many homeowners become delinquent borrowers and quickly fall into foreclosures rather than deciding to offer their house on the market as a short sale.
The dangers of a foreclosure are the lasting effect it has on your credit score and credit history. A foreclosure is one of the most credit-damaging events that can appear on your credit history, remaining on your history for a minimum of seven years. A short sale on the other hand is reported on your credit as paid or settled and although it may lower your credit score, its impact is far more minimal than a foreclosure.
Selling a home, as a short sale is the compromised solution that benefits the homeowners and the bank as the homeowner avoids foreclosure and the diminishing of their credit and the bank does not lose as much as they would on a foreclosure.