patrick.net

http://ochousingnews.com/blog/flattening-house-prices-will-300000-socal-loanowners-get-water/

When lenders began denying short sales, underwater owners were forced to wait for higher prices to sell, and with flattening prices, they are stuck.

Lenders caused the housing market to bottom and to rally in 2012 and 2013 by favoring loan modification over foreclosure and by denying short sales to greatly reduce distressed inventories and overall supply. It worked fabulously for them, and prices rocketed upward for nearly 18 months. The abrupt rise in interest rates in mid-2013 lowered the ceiling of affordability, and the house price rally was stopped dead in its tracks.

When lenders began denying short sales, both they and the borrowers believed they would all be above water in a few years, and the loanowners would sell for enough to pay off the promissory note. This mutually held belief in rapid appreciation leading to an equity sale dissuaded many strategic defaulters and prompted many borrowers to accept loan modifications to play along. But what happens if prices stop going up? Will borrowers still wait patiently — for years — for prices to reach the peak? Will lenders extend loan modification after loan modification to keep borrowers in their homes?

Source: http://ochousingnews.com/blog/flattening-house-prices-will-300000-socal-loanowners-get-water/#ixzz386zRwKi0

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