BY: BRITTANY DUNN
DSNews.com reported earlier this week, the U.S. Treasury Department announced new guidelines to the short sale process on Monday in hopes of speeding up the recovery of the housing market. Occurring when a lender accepts the sale of a home at a price below the actual amount owed, short sales have become a growing part of the real estate business as troubled homeowners seek out alternatives to foreclosure.
Under the Making Home Affordable program, this new plan will aim to assist struggling homeowners by offering easier aid and financial compensation. The short sale process will be streamlined, making it less difficult for companies to complete these transactions. This new legislation will help decrease the amount of unnecessary paperwork while still requiring essential information.
RE/MAX, who claims to have the most versed associates in short sales and foreclosures, fully supports these reforms and said its executives have been promoting this initiative for the past year. David Liniger, chairman and co-founder of RE/MAX, started pushing for a streamlined short sale process shortly after foreclosures began to flood the market and presented specific proposals to government officials in Washington D.C. He believes these new reforms will help many families avoid the trauma of foreclosure and help the housing market stay on the road to recovery.
?Short Sales are absolutely critical as more and more people continue to face foreclosure and as our housing market struggles to recover,? said Liniger. ?While not all of our recommended changes were implemented, the Treasury?s new guidelines go a long way in incentivizing both lenders and homeowners to work together to keep homes from falling into foreclosure.?
Through these reforms, the short sale process will be enhanced. Mortgage servicers will have 10 days to accept or reject a short sale request, and after the transaction is complete, it is possible that the borrower could be completely released from debt. Financial incentives will be provided to borrowers selling their home through a short sale and to mortgage-servicing companies completing short sale transactions. The program also facilitates the transfer of ownership by a borrower through a ?deed in lieu of foreclosure.? Through this enhanced process, short sale transactions are projected to dramatically increase, resulting in less vacant and vandalized properties around the nation.
As almost one quarter of American homeowners are underwater in their mortgages, Scottsdale, Arizona-based Loan Resolution Corporation said it believes the government?s new legislation will encourage short sales in order to reduce foreclosures and prop up the nation?s ailing real estate market, but the company isn?t convinced the program will be accepted by subordinate lien holders. As part of the reform, subordinate lien holders will be paid up to $3,000 of the short sale proceeds, pending agreement by the investor to share the earnings. The Treasury said second lien holders who want more than this will have to pursue a short sale outside of the federal program.
?While we are excited about the new measures that the Treasury announced, we believe that subordinate lien holders will have a limited adoption rate of the program,? said Travis Hamel Olsen, COO of Loan Resolution Corporation. ?It is a step in the right direction, but there needs to be more incentive to subordinate lien holders.?
Click on Hamp Update if you want to read it for yourself.? If you want to read the entire Supplemental Directive, you can find that at Directive. ?Brian
Eligible loans under the program are at least 60 days past due, in foreclosure or bankruptcy, and originated before 2009. The underlying property must be owner-occupied and conform to Fannie Mae and Freddie Mac loan limits, which can be as high as $729,750 in some areas. A borrower?s first mortgage payment must be 31 percent or more of their gross monthly income to qualify.