US Plan to Streamline & Simplify Short Sales

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The U.S. Treasury plan to help homeowners avoid foreclosure 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). The plan, which provides incentives for lenders and homeowners for completing Short Sales, is many-faceted:
  • It provides incentives to lenders and borrowers for completing Short Sales
  • It streamlines and standardizes the documentation necessary for Short Sales
  • It limits the ability of subordinate lien-holders to obstruct the Short Sales process
  • It sets limits on the time it takes lenders to approve or reject Short Sales requests
  • It steps up pressure on lenders to make permanent the 650,000 trial loan modifications they started earlier in 2009

Incentives to Borrowers

Under the plan, borrowers who complete a Short Sale are released from all mortgage debt. Additionally, they receive $1,500 for moving expenses.

Incentives for Lenders

The plan provides for payments of $1,000 to mortgage servicers and investors for completing a Short Sale - or a deed-in-lieu transaction, in which the deed is simply turned over to the lender.

Standardized Documentation

The program will publish streamlined and standardized documentation for Short Sales, including a Short Sale Agreement and Offer Acceptance Letter. Creating one standard set of documents will minimize the complexity of Short Sales, which should significantly increase use of the optionn.

Payments Capped to Subordinate Lien-Holders

Some holders of second mortgages have blocked Short Sales by requiring payment in exchange for releasing their claim. Under the plan, subordinate lien-holders as a group can receive no more than $3,000 from proceeds of the sale.

Time Limits for Short Sales

Lenders will have only 10 days to approve or reject a Short Sale - a significant step, since the process often takes so long to complete that the transaction falls through. Borrowers will be allowed at least 90 days to market and sell their home, with the possibility of additional time based on local market conditions. Marketing can run at the same time as the foreclosure process, but no foreclosure can take place during the marketing period as long as the borrower is acting in good faith to sell the property.

Many real estate agents have undergone 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, a real estate professional can help. Try to select a real estate agent with a Certified Distressed Property Expert (CDPE) or Short Sales and Foreclosures Resource (SFR) designation to ensure their level of expertise.

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