This could potentially be big news, I’ll wait and see.
By Ruth Simon , The Wall Street Journal
The Obama administration laid out final guidelines on Monday that should make it easier for some financially troubled borrowers to sell their homes.
The guidelines are designed to encourage the use of short sales, transactions in which the borrower with lender approval sells the home for less than what is owed on the loan. The program also makes it easier for borrowers to voluntarily transfer ownership of properties through a “deed in lieu of foreclosure.”
Short sales can result in higher prices than foreclosures and can be less damaging to local neighborhoods, in part because homes aren’t left vacant and exposed to vandalism. But these transactions are often difficult to complete.
Under the plan, borrowers will receive $1,500 from the government if they sell their homes for less than the amount of their mortgages. Mortgage-servicing companies will also receive $1,000 for each completed short sale. The program is open to borrowers who may be eligible for the government’s loan-modification program, but don’t end up qualifying, or are delinquent on their modification, or request a short sale or deed-in-lieu transaction.
[We saw this same thing with the Obama administration's push for loan mods, which turned out to be quite a flop - post your comments below!]
The short-sale program is the latest addition to the Obama administration’s $75 billion foreclosure-prevention plan, which includes incentives for mortgage companies and investors to rework troubled loans. The government first said in May that it would include short sales in the program, but it has taken months to finalize the details.
[I can only wonder how the lenders will decide to play. IF they even do. I can see benefit for the homeowner, but will banks play? - Leave your comment]
Under the new guidelines, second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first mortgages, meanwhile, can collect up to $1,000 from the government for allowing such payments.
[Come ON! This is OLD news. This has been in play for a long time now, with many 1st's allowing 3k for 2nd's. The administration has been under a rock! - Thoughts? Leave your comment below!]
Borrowers who complete a short sale under the program must be “fully released” from future liability for the debt, according to the guidelines.
[Now, if this is what it looks like, I LIKE it! But, what does fully released mean? Can the lender still pursue a deficiency? Issue a 1099?]
That’s it. I’d love you to leave your comments so we can share a dialogue on this. I think it’s a hot topic.
Take care,
David Corbaley
Don’t forget to pick up your free ebook on short sales at the main Top Foreclosure Training site!
{ 6 comments… read them below or add one }
This has lots of great information. I’m going to keep coming back for more details on a fascinating subject written so that everyone can understand it. Thank you for sharing a lot of valuable information and please write again on this subject soon!
2nds are NOT happy with $3K anymore! Most want at LEAST 10% of the loan balance which in CA is almost always over $3K. In addition, most 2nds (\"per investor guidelines\") will only allow a max agent commission of 4%.
I agree Leslie. It’s just another example of how the govmnt is way behind the 8-ball!
I have several friends who have actually upgraded their housing situation by buying homes of twice the value, bought expensive luxury cars, boats, and everything they think they\’ll need for the next 10 or 15 years, and have now walked away from their previous motgage. I dont think they deseve the protection of being released, but then again they didn\’t complete the short sale.
I would agree with you there. I’m sure there are many people that have done the same thing. Where do you draw the line? Should every short sale actually be looked into for this type of thing?
I agree with you David, I believe the government has hid its head in the sand or something and are not aware of what is going on. Or they do and are not really willing to address the banks on this problem. Just like they bailed out the banks, homeowners deserve any help that can be given them. In truth, I think the banking industry is running the country, they have our money, they are not lending money, they are making hard to modify loans and do short sales. IT’S ALL A SHAM!!