Short Sales May Finally Shorten Up

The Treasury Department has stepped up in their efforts to help lenders and servicers facilitate the ability to short-sell a piece of property.  A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.
Now the government is stepping in, giving mortgage servicers participating in its Home Affordable Modification Program until April 5 to implement the Home Affordable Foreclosure Alternatives program.   The new guidelines are very detailed but a few key points are likely to be welcome. Now a servicer must first consider a delinquent borrower for a loan modification before a short sale, and a servicer has to consider a borrower for a short sale within 30 days if the borrower can’t get a trial loan modification, misses as least two payments in the trial period, doesn’t complete the trial period successfully, or requests a short sale.
Also, a servicer needs to spell out the minimum it will accept in a sale.  Perhaps the best news is now the servicer has to let the borrower know within 10 days of receiving an offer whether it will be accepted. If the offer is at least equal to that minimum, the servicer has to accept it.
Short sales have become a recent, yet frustrating method of trying to buy a distressed property that can take many months without any established time table or procedure in completing.  Often when the agreement to short sell a property finally comes to pass, the turn around time for the new buyer is so fast that the necessary funds are difficult to gather in time for the quickly scheduled closing.
A short sale can be the best option for a homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially.
Follow Chicagoland Real Estate Forum on Twitter!