Many of the programs designed to help homeowners in distress have provided less than satisfactory results. Some of the qualifications needed to restructure or modify a loan have come with fine print that have proven to be more well intentioned as opposed to actually helping the people they were designed to benefit.

Adding to the stress of the ticking foreclosure clock is the uncertainty along with the unresponsive reply of the person or entity that now has control of your destiny……the lender. Be prepared to ride the stationary bicycle, no matter how hard you peddle, you’re not going anywhere.

If your journey toward home redemption has been less than disappointing, then the possible outcome was a short sale or foreclosure. At this point some people just give up, walk away and let the lender have the house back. We have actually worked with homeowners that may have been in a bankruptcy and the attorney has advised them to let the bank have the house. We’re talking foreclosure here. The after affects can be devastating. It has been reported that a foreclosure can reduce your credit score by up to 160 points. A short sale unlike a foreclosure does not have an impact on your FICO score. It will however be reduced by missed or late payments.

As we enter the third year of the real estate and mortgage meltdown, it now appears that the Treasury Department has issued new guidelines on short sales that will dramatically alter the way in which short sales are approved.

Components of the Plan

The new program will be beneficial in the following was:

1. Speeds up the process – lenders will now have 10 days to approve or deny the proposed sale. In the past, a short sale could take as long as 6 months.
2. Moving allowance – when completed the seller’s receive $1500 for moving expenses. Currently short sellers receive no proceeds from the sale of their home.
3. The program also allows up to $3000 for second lien holders who many times see their balance reduced to zero during a short sale. The program will also pay $1000 to mortgage service companies and investors who hold the first mortgage for allowing the program to proceed.

The program is not officially effective until April 5, 2010, but does allow for early adoption if certain requirements are met.

Short Sale Summary

On its surface this program sounds exactly like what is needed to expedite the housing recovery. It will be interesting to see if the 10 day time frame for either the approval or rejection can be met. I have only read many piece meal articles and nothing that spells out how everything is to work. It does appear that the homeowner will have to submit to either a loan modification or refinance which would ultimately be rejected for the homeowner to proceed. At this point the bank is in possession of all of the homeowners financial information so a quick decision could have been in the process for quite some time.

Lets hope this program works.

Tags: new short sale guidelines, short sale alternative to foreclosure