By Al Yoon
NEW YORK, Nov 30 (Reuters) – The U.S. Treasury on Monday set long-awaited guidance on a plan for mortgage companies to speed “short sales” of homes and other loan modification alternatives to stem a rising tide of foreclosures.
The Home Affordable Foreclosure Alternatives Program provides financial incentives and simplifies the procedures for completing short sales, a growing practice in which a lender agrees to accept the sale price of a home to pay off a mortgage even if the price falls short of the amount owed, according to an announcement on the Treasury’s website.
Guidelines address barriers that have often sidelined short sales by setting limits on the time it takes a bank to approve an offer, freeing borrowers from debt and capping claims of subordinate lenders.
The incentives, first announced in May, expand on the government’s Home Affordable Modification Program, known as HAMP, that has seen limited success in lowering payments for distressed homeowners. The Treasury earlier on Monday stepped up pressure on mortgage companies to make permanent the 650,000 modifications offered under trial conditions.
“While HAMP program guidelines are intended to reach a broad range of at-risk borrowers, it is expected that servicers will encounter situations where they are unable to approve” a modification, the Treasury said in its announcement.
Short sales have been frustrating for borrowers and real estate agents, often hung up by negotiations with multiple lien holders and mortgage insurance companies. Real estate agents have complained that sales 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.
In one of the most contentious issues for real estate agents, the guidance caps the aggregate proceeds to subordinate lien holders at $3,000.
The Treasury’s guidance would require that the borrower be fully released from future liabilities.
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. ( End of article.)
(Editing by Leslie Adler) ((email@example.com; +1 646-223-6347; Reuters Messaging: firstname.lastname@example.org))
A personal note from Bob Phillips. This is outstanding news for both sellers and buyers! Many of today’s better buys are short sales.
I have considerable experience with short sales, which cost a seller $0, and with consulting on loan modifications, with no up front fees. If you, or someone you know is in trouble with a mortgage, such as being “under water”, please give me a call, or shoot me an email, before it’s too late.