Lenders: Last Chance for Homeowners Turning to Short Sales

During the housing boom, a lot of home buyers thought they are finally going to live the American dream. But the mortgage industry collapse and the global financial crisis, it is not surprising that for many, the dream has turned into a nightmare.

A considerable number of homeowners now have what is referred to as an underwater mortgage. This is a situation wherein you owe more in mortgage than what the property is currently valued in the market. One way out of this particular mortgage mess is through a short sale. It is a transaction wherein the lender agrees to accept a smaller amount as payment for the mortgage balance. Usually, lenders do not prefer this option but with circumstances in the market changing, a lot of them realized their loss is smaller compared to a foreclosure.

Last year, the Obama administration launched the Making Homes Affordable Program. It is a plan which will supposedly stabilize the market and at the same time, help distressed homeowners enjoy relief from their mortgage. The objective of the said program is actually divided into two: to help eligible borrowers avoid foreclosure with either a loan modification or refinance.

To supplement these programs, there is also the HAFA or Home Affordable Foreclosure Alternative which basically directs homeowners to consider either a deed in lieu of foreclosure or a short sale if they did not meet the requirements for loan modification or refinancing. Under this program, homeowners can receive monetary incentives in the form of relocation assistance.

Based on the latest statistics, the number of short sales is actually increasing as more and more lenders approve short sale proposals. Compared to 2009, the number of short sales soared by 126 percent. Meanwhile, for the 2nd quarter of 2010 the figure increased by 42 percent.

Based on data obtained by the Distressed Property Institute, there were over 96,000 homeowners who managed to avoid foreclosure with a short sale during the first six months of this year. This figure represents only 26 percent of the total transactions involving distressed properties. This means majority still ends up losing their homes to foreclosure or abandoning them.

Ref: http://www.santafenewmexican.com/Local%20News/Long-road-to–a-short-sale