The government is working out the details of expanding the Home Affordable Programs to cover short sales and deeds in lieu of foreclosure. The program will streamline the short sale approval process in an effort to close short sales faster. The average Arizona short sale closing currently takes about 4-6 months from start to finish. In that time span, many buyers get discouraged and walk away from the deals, making it further frustrating for the seller and their Realtor, who have to find another buyer and start the negotiations all over again with the seller’s lender.
As an incentive to approve the short sale, the government is proposing to offer lenders and loan services cash incentives for approving short sales and deeds in lieu of foreclosure. The amounts of the incentives still have to be worked out. One proposal is that the government will offer lenders $1,000 for agreeing to approve a short sale or deed in lieu. Borrowers would purchase a short sale property will also get a proposed $1,500 incentive towards their closing costs. Second lien holders would receive an incentive for giving up their claims in an amount up to $1,000.
The new program is designed to:
- Help homeowners avoid foreclosure proceedings.
- Avoid another surge of foreclosure homes hitting the market keeping prices down.
- Save lenders the time and expenses of going through a foreclosure process.
By streamlining the short sale process and giving all parties an incentive to participate in the program, it should help to get some of these distressed homeowners out of their situations and stimulate the housing market.
The program is modeled after the government’s Home Affordable Modification Program released earlier this year. However, according to the Treasury Department, only 12 percent of eligible homeowners have received refinances. The problem with the refinances and modifications has been that the homeowners found out soon thereafter that they could not afford their new mortgage payments. Six months or so down the road, these homeowners ended up defaulting again on their mortgage payments again, and some homeowners lost their homes to foreclosure.
Eligibility for Proposed Short Sale Program
The same qualifications for the Making Home Affordable program will still apply to the new proposed short sale program. A quick highlight of the primary rules include:
- Loans must have originated on or before January 1, 2009 will be eligible.
- Only owner occupied first lien loans with unpaid principal balances up to $729,750 are eligible. There are higher limits allowed for owner-occupied properties with 2-4 units. No investor owned properties, vacant properties or condemned properties are eligible under the program.
- Borrowers must document their income with their last two paycheck stubs, their recent bank statement, their most recent income tax returns and a hardship letter explaining their current financial hardship and why they believe they can no longer afford their mortgage payments.
The only difference under the proposed short sale program is that homeowners must now show that they are unable to meet the new loan modification payments. The proposed short sale program should help millions of distressed homeowners avoid foreclosure and give buyers, their Realtors and the sellers’ lenders incentives to close short sale transactions. The real estate community has been calling for a streamlined short sale process for a long time now. As it currently stands, many buyers and their Realtors avoid short sales because there is no guarantee the transaction will be approved and the process takes too long. The new proposed short sale program is a good solution for everyone.
The Cameron Team are certified Short Sale Specialists with extensive experience saving Arizona homes from foreclosure by obtaining positive results with short sales for homeowners in the Scottsdale, Phoenix and the surrounding communities of McDowell Mountain Ranch, DC Ranch, Silverleaf, Grayhawk, Desert Ridge, Desert Highlands, Tatum Highlands and Tatum Ranch. In fact, we closed 6 last month.
If you need one, we have an attorney offering a 10 to 15 minute FREE consultation.
Jeff Cameron
480-652-2004