Short Sales May Get Boost
Washington-The use of short sales as a foreclosure avoidance tool may get a boost now that the Treasury has issued guidelines to streamline the process which can be frustrating for sellers and homebuyers alike.
The new guidance is designed to expedite short sales and deed-in-lieu transactions for struggling borrowers that cannot qualify for a permanent loan modification under the government's HAMP program.
Servicers can offer borrowers these options if they do not qualify for a HAMP trial or have missed two consecutive payments.
The guidance establishes procedures for HAMP servicers to provide borrowers with a pre-approved price and sale terms prior to listing the property.
Once the borrower submits a signed sales contract and all required attachments, including the status of subordinated liens, the servicer has 10 days to approve the sale.
The success of short sales really depends on the time it takes to consummate a sale. Buyers get frustrated and give up if the banks or investors don't respond to offers in a reasonable time.
The new guidance integrates short sales into the HAMP program and draws on best practices, according to Joe McCloskey, senior advisor to HomeTelos, a Dallas RE services firm specializing in short sales.
Treasury also is making a "very effective use of incentives," Mr. McCloskey said. HAMP servicers will receive a $1,000 incentive payment for each completed short sale and deed-in-lieu transaction. The former homeowner will receive $1,500 for relocation costs. Investors can receive up to $1,000 if they pay $3,000 to subordinated-lien holders that relinquish their claims.