Short sales got a shot-in-the-arm from the Obama administration today.
The Making Homes Affordable Program now offers financial incentives for completing short sales and similar deed-in-lieu transactions, include a $1,000 payment to servicers, and up to $1,000 for investors who sign off on payments to second and third liens.
Borrowers, too can receive $1,500 in relocation expenses.
It is a great workout option if you are just too underwater or just can no longer afford your home (or both) - better than foreclosure because they can preserve the borrower's credit rating.
While primary lenders typically realize steep losses, their recovery is typically far better than under foreclosure...
which typically means getting money later and risks damage to the home during vacancy, etc.
But short sales have been frustrating for everyone, especially in high foreclosure states, often hung up by negotiations with multiple lien holders and especially if mortgage insurance companies are involved.
Sales often fall through as lenders bicker over the sales price, what they should receive from the proceeds, and whether the borrower will be held accountable for the debt in the future.
Program requirements include that mortgage servicers have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt.
It also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.
This is nothing but good news for all of us concerned about our fellow citizens in foreclosure!