New Federal Rules on Short Sales in the Making?
Posted by Bob Chase | Visited 186 times, 1 so far today | Leave A Comment »
Just a few days ago, Kenneth Harney, a nationally syndicated real estate columnist, reported in the Washington Post that for those home owners in trouble on their mortgage and can’t get a loan modification, there may be light at the end of the tunnel for them. The Obama administration is adopting…or probably more appropriately…”will try to adopt” a new standard for short sales. The plan is essentially designed to assist short sellers speed up the process of what is traditionally “contentious” and incredibly time-consuming.
As a refresher, a Short Sale involves a lender or investor agreeing to collect less than the balance owed on a mortgage debt out of the proceeds of a negotiated sale of the property. A Short Sale can be looked upon as the last dying breath of an attempt avoid foreclosure for a distressed home owner.
Here are a few important points to remember for anyone considering a Short Sale. First, it is very important to see if the lender will accept a short sale. The lender will basically run the numbers to see if a short sale will yield more money at the bottom line than a foreclosure. So here’s what to do: Contact a Realtor (I have a great one in mind…ME!) who can put together the key information needed by the lender, i.e. recent comparables on CLOSED sales, local market trends, and the likely selling price of your house. At this point, you’ll want to have a buyer identified for the property, a buyer who’ll pay a price acceptable to the lender and has financing to close the deal.
Before adopting the new plan to stream line the short sale process, be sure to keep in mind that short sales could take months to close. Next, Lenders and Service providers will be required to use pre-approved Short Sale uniform documentation and accelerated turn around times. The plan also provides financial incentives for key players. Here is a sampling of incentives which are Pro Forma and certainly subject to change:
- Homeowners who successfully complete a short sale under the new program receive $1,500 to defray relocation costs.
- Mortgage providers can receive $1,000 per case.
- Second-lien holders receive up to $3,000 from the sale proceeds.
- Even Realtors are in the mix with rules prohibiting lenders from forcing them to cut commissions
There also could be a major stumbling block with the Administration’s plan. Harney reports that since the plan tilts toward the consumer by requiring second lien holders to “drop all financial claims against short-selling borrowers beyond the $3,000 they take out of the deal.”
Although Major Lenders are still studying the fine print, the initial reaction seems to be positive and there should be more information on this important development as the New Year begins.
