The Treasury Department has unveiled new rules for short sales starting in 2010. Troubled homeowners, either by loss of job, not enough money in savings, or just too high a mortgage payment may need to sell their home to get back in a realistic situation. Many of these homeowners need to sell, but they can’t get a price high enough to pay off their mortgages. According to the National Association of Realtors, roughly 1 in 10 homes was a short sale in 2009.
What the Treasury Department did was streamline the short sale process which will help the lenders, real estate agents, sellers and buyers reach agreements more quickly. It’s also designed to help fill the gap where homeowners don’t qualify for a loan modification program under the Obama administration.
A few highlights of the program:
1. Homeowners will be eligible for $1500 to help cover their moving costs
2. Mortgage companies don’t have to launch the program until April 5, 2010
3. The program is voluntary for 2nd lien holders such as home equity loans
4. Other secondary lien holders are eligible for $3000 to release their interest
5. Mortgage companies are eligible for $1000 to cover administrative costs
6. Mortgage companies will have to approve the terms, such as the minimum listing price which will help speed up the approval.
Lenders can implement this program immediately, but they will likely wait until the deadline because they will need to ramp up personnel, training and the processes.
Short sales help reduce the borrower’s credit record as it relates to a foreclosure, save the lenders the cost of a foreclosure and help the neighborhood property values. It’s estimated that a lenders average loss in a short sale is 40% vs. 70% in a foreclosure. Foreclosures cost more and the properties are sold for less.
Short sales are a way of life right now and unfortunately they are anything but quick. For Denver real estate, this new program is a breath of fresh air.
Denver & Parker, CO