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| Struggling borrower able to dodge painful foreclosure with short sale By: Jeff Ostrowski 06/08/08 Homeowner Chentella Harper-Graham fell behind on her mortgage payments after a one-two punch to her pocketbook. Her husband lost his job as a clerk at a law firm, and she became caretaker for her ailing mother. "We had to take care of our mortgage and ourselves, and we couldn't do both," Harper-Graham says. The West Palm Beach woman was among the flood of Palm Beach County borrowers facing foreclosure, but she was able to escape her mortgage default relatively unscathed, thanks to a successful short sale. Short sales occur when a borrower owes more than a home is worth and the lender agrees to eat the difference. With home prices falling and default rates soaring, short sales have become a much-hyped, if imperfect, solution for lenders and borrowers facing foreclosure. Even short-sale proponents like Bob Graeve, the Illustrated Properties Real Estate agent who helped Harper-Graham navigate her transaction, acknowledge that dealing with bank bureaucracy requires Job-like patience. Harper-Graham says the process lasted six months. "Even though we gave them everything, they'd say they didn't get this one sheet, so we'd have to send everything again," Harper-Graham says. "It was very frustrating." In 2005, Harper-Graham paid $131,900 for a 960-square-foot condo in West Palm Beach. In 2006, she refinanced for $153,000 and used the extra cash to buy flooring and cabinets. By late 2007, when lender US Bank filed a default notice, the unit's value had plunged. Harper-Graham sold in March for $90,000 - including the uninstalled flooring and cabinets. US Bank agreed to a $60,000 bath. For Harper-Graham, the fallout from a short sale was far less devastating than a foreclosure would have been. "My credit didn't get hit too hard," Harper-Graham says. Speaking of loan defaults, mortgage insurer Genworth Financial aims to stem the rising tide of foreclosures. Richmond, Va.-based Genworth, (NYSE: GNW), one of Florida's largest mortgage insurers, has been contacting borrowers in an effort to get them back on track. The results of these "workout" efforts can include lengthening a loan term from 30 years to 40 to lower the monthly payment, or arranging a short sale. Genworth arranged 548 such workouts for Florida properties in the 12 months that ended in March, Vice President Alan Goldberg says. "Most lenders today definitely want to avoid foreclosure," he says. "Everyone benefits. The servicer keeps the loan and the revenue. The mortgage insurer avoids the claim. And the borrower gets to keep their home." The massive Gander Mountain store in Palm Beach Gardens just opened in March, and already it's up for sale. There's nothing unusual about the quick flip, says Jerry Hopkins, the Oklahoma-based broker who's handling the listing. Gander Mountain, a seller of guns, rods, boats and camouflage, typically works with merchant builder Oppidan Inc. to construct its stores. After the doors open, Oppidan looks for an investor to buy the property. The 120,000-square-foot Palm Beach Gardens store sits on 13 acres along Interstate 95 and is expected to generate net operating income of $3.2 million a year, Hopkins says. Asking price is $37.8 million. St. Paul, Minn.-based Gander Mountain (Nasdaq: GMTN) has 115 locations. *** |