New Government Rules Unveiled to Expedite Short Sales
The U.S. Treasury department announced a host of new rules this week intended to help jump start sales of homes by homeowners in default on their mortgages in cooperation with their lenders. Short sales occur when lenders agree to accept less than the existing loan balance on houses prior to foreclosures and homeowners will even get $1,500 to help cover their moving costs.
Hopefully this new program might make a difference to Southeast D.C. homeowners unable to sell their homes for a price able to payoff their existing mortgages. Many recent sales in Anacostia and he RiverEast area have been to lenders foreclosing at a price equal to the outstanding mortgage balance and higher than the market price.
This new program is for homeowners who don’t have the income or debt levels to qualify for a loan modification under the Obama administration’s $75 billion Making Home Affordable program.
One of the most significant aspects of the new program is that it sets a standard process and documents, and cash incentives for participation.
Short sales minimize the damage to the borrowers’ credit record and help lenders avoid or reduce the cost of foreclosure.
Some of the important specific requirements are as possible:
1. Must be primary residence
2. Must be either delinguent or likely to default
3. Loan must be less than $729,750 and have been closed before January 1, 2009
4. Monthly mortgage payment must exceed percent of their before-tax income.
It is the Treasury’s objective that this new program will expedite the process between lenders, real estate agents, buyers and sellers. Many real estate firms and agents (like Redfin) refuse to work on Short Sales because they are so time consuming and rarely successful.