Will the New Short Sale Rules Help the Process?
By Peter Smith
Photo: © Ann Marie Kurtz - iStockphoto
Short sales are a tricky business. If a homeowner owes more money on his house than he can sell it for and is having trouble paying the mortgage, the bank will allow the house to be sold for less than is owed. That’s a short sale in theory. In the real world, banks don’t like to do them. They do everything in their power to make the process drawn out and complicated. It’s no wonder that only one in ten short sales is successfully completed.
There is help on the horizon.
The Home Affordable Alternatives Program (HAFA) has just released some new guidelines that are set to take effect in April of 2010. These new rules are designed to streamline the process and allow more delinquent homeowners to sell their homes and get on with their lives. The program is voluntary, but offers incentives for borrowers and lenders to work together to prevent foreclosure. Here is a summary of some of the points that will have the greatest impact. |
- A homeowner will be able to get a short sale approval in advance. This is huge! In the past, the banks wouldn’t even look at a short sale unless there was an offer for the property. The homeowner, real estate agent and the buyer were flying blind. The new guideline allows the owner to receive a pre-approval from the bank that includes the minimum net amount it will accept.
- The banks cannot reduce the commissions of the real estate agents that are stated in the listing agreement (up to six percent).
- Provides new incentives for the borrower to complete the process. They are now given $1500 for relocation expenses. This will make the transition much easier for the homeowner.
- Mortgage servicers will also get $1000 for each completed short sale.
- Under certain circumstances the homeowner may be able to be released of all liability for the loan.
What are the qualifications?
The homeowner must be delinquent and unable to pay for their mortgage. The loan must be less than $729,750, made before January 1st of 2009, and the home must be the owner’s primary residence. The homeowners' mortgage payment is more than 31 percent of their before-tax income. |
