U.S. Plan to Help Homeowners Avoid Foreclosure

Homeowners across the United States who are undergoing financial hardship could avoid foreclosure under a plan announced on Nov. 30 by the U.S. Treasury Department. Under the plan, millions of at-risk homeowners could be free of mortgage debt without going through foreclosure, and given $1,500 for relocation.

The Treasury plan, which potentially applies to 75 percent of the mortgages in the U.S., including those backed by Freddie Mac or Fannie Mae (those two organizations are currently devising guidelines), provides incentives for lenders and homeowners for completing Short Sales – transactions in which the lender agrees to a sale price that's less than the borrower owes on the mortgage. Short Sales are preferred to foreclosure because homeowners take less of a hit on their credit and lenders realize a smaller loss.

However, Short Sales often get bogged down because of the complicated nature of the transaction. Deals can fall through because they take too long. Buyers are discouraged with the extended short sale process, which frequently results in foreclosures that could have been prevented.

On April 5, 2010, the U.S. government will implement the Home Affordable Foreclosure Alternatives Program (HAFA). Part of the Home Affordable Modification Program, HAFA helps home owners who are unable to retain their home under HAMP by simplifying and streamlining the use of short sales and deeds-in-lieu of foreclosures. The official effective date of the plan is April 5, 2010, but participating mortgage servicers can begin operating under the terms of the program before then if they are ready to meet all reporting requirements.

Under the plan, which speeds up and simplifies the Short Sale process, mortgage servicers have 10 days to approve or reject a request for a Short Sale. And when the sale is done, the borrower must be fully released from the debt.

Many real estate agents have been through extensive training to help homeowners avoid foreclosure. If you've fallen behind in your mortgage payments or received a pre-foreclosure letter from your lender, contact a real estate agent with a Certified Distressed Properties Expert designation today.