New Government Program To Streamline Short Sale Process

Short sales can be frustrating and stressful for everyone involved. Extensive delays in the short-sale process have caused many buyers to back out of transactions and have left sellers with no option but foreclosure. Recently the US Treasury announced that new components of the Making Home Affordable (MHA) program are aimed at preventing foreclosures and streamlining the short sale and deed in lieu of foreclosure processes. The Making Home Affordable program is designed to help homeowners obtain modifications to their loan so they can afford to stay in their home. Since the launch of MHA, more than one million Americans have now refinanced and thousands of underwater borrowers have refinanced under the Home Affordable Refinance Program. For homeowners that don’t qualify for a loan modification under these programs, a new component of MHA will simplify and streamline the process of pursuing short sales and deeds-in-lieu. From what I’ve read so far, there are 2 components: Foreclosure Alternatives and Home Price Decline Protection Incentives.

Foreclosure Alternatives will provide incentives for servicers and borrowers to pursue short sales and deeds-in-lieu of foreclosure. These incentives include help with relocation expenses for the borrower/homeowner and payments to the loan servicers and junior lien holders. The program also provides a standard process flow, minimum performance timeframes and standard documentation that will make the short sale process easier for a borrower (and hopefully easier for buyers as well).  

Home Price Decline Protection Incentives will provide lenders additional incentives for modifications where home price declines have been most severe and lenders fear these declines may persist. A payment system has been developed that provides compensation based on recent home price declines.  Payments will be linked to the rate of recent home price decline in a local housing market, as well as the average cost of a home in that market. Together the incentive payments on all modified homes will help cover the incremental collateral loss on those modifications that do not succeed.

The National Association of Realtors has put together a summary of the details: http://www.realtor.org/wps/wcm/connect/15c5e0004e1a95378582f7ec21680fb0/government_affairs_short_sales.pdf?MOD=AJPERES&CACHEID=15c5e0004e1a95378582f7ec21680fb0

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