Categorized | Foreclosures, Short Sales

New Short Sale Incentives

Posted on 07 December 2009 by Aaron Hofmann

So with the foreclosure crisis not slowing down, U.S. Treasury officials are hoping new incentives will accelerate short sales and other alternatives to rescue homeowners.

While new incentives have been introduced, keep in mind that they don’t take effect until April 30, 2010. Effective that date, the government’s Home Affordable Modification Program (HAMP) will incentivize lenders to accelerate short sales or deed-in-lieus.

Certainly one of the most needed items is the guideline requiring lenders to consider borrowers for a short sale on their primary residence 30 days after missing two consecutive payments on a modified loan or after the borrower requests a short sale.

The MAHP will also be offering monetary incentives. It will pay up to $1,500 for a homeowner to relocate; $1,000 to lenders that accept a sale to cover processing expenses, and a maximum of $1,000 to help settle a second mortgage or subordinate lien. The Treasury plan requires that borrowers be fully released from future liability for the debt.

U.S. Treasury and bank regulatory officials say foreclosures are still greatly outpacing the alternative of short sales or deeds-in-lieu of foreclosure. For every short sale or DIL as of the first half of 2009, there were 23 foreclosures, according to the Office of the Comptroller of the Currency.

So what’s a short sale? In a short sale, the lender allows the borrower to list and sell the property with the understanding that the net proceeds from the sale may be less than the total amount due on the mortgage. While the lender is not actually a party to the contract to sell the home, any contract is contingeny upon the lender agreeing to not being fully reimbursed.

Deed-in-lieu of foreclosure is less common, but essentially the borrower voluntarily transfers ownership of the property to the lender to fully satisfy the total amount due on the first mortgage. The lender’s approval is contingent upon the borrower’s ability to provide marketable title, free and clear of mortgages, liens and encumbrances.

The new incentives are intended to simplify and streamline the use of short sales and DIL options by allowing the borrower to receive pre-approved short sale terms prior to listing the property, prohibits the lender from reducing the real estate commission, implement standard processes, documents and timeframes and provides financial incentives to borrowers, servicers and investors.

What the final outcome and how this program is received in the industry will only be determined in time. If you are a distressed Atlanta home, it is important to to work with an Atlanta Realtor, with the knowledge base and expertise to guide you through the process. Contact us to schedule a confidential consultation to assess your situation and determine how we can assist you.

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  1. Atlanta Loan Modifications and Short Sales - Government Puts Pressure on | Atlanta Short Sales and Foreclosures |Certified Distressed Property Expert | Keller Williams Realty Says:

    […] the new short sale incentives being introduced, but not taking effect until April 30th, it will be interesting to see what […]

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