Good news from Washington, D.C., today. The Obama administration announced new details under its Foreclosure Alternatives Program (FAP) enabling servicers and borrowers to pursue short sales and deeds-in-lieu (DIL) of foreclosure in cases where the borrower is generally eligible for a Making Home Affordable modification but does not qualify or is unable to successfully complete the three month trial period. The program, effective through 2012, requires that prior to proceeding with a foreclosure, servicers must determine if a short sale is appropriate.
We're gratified that the administration has recognized the need to streamline the short sale and deeds-in-lieu processes, and has provided viable options to homeowners who have fallen behind on their mortgages but owe more than their homes would sell for in today's challenging market. We also appreciate the efforts of our colleagues at NAR for keeping this issue front and center in our nation's capital.
Incentives in the FAP program include $1,000 for servicers for successful completion of a short sale or deed-in-lieu of foreclosure; $1,500 for borrowers/homeowners to help with relocation expenses; and up to $1,000 toward the cost of paying junior lien holders to release their liens ($1 from the government for every $2 paid by the investors to the second lien holders).
The FAP includes streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter to minimize complexity and increase use of the short sale option. Servicers will independently establish both property value and minimum acceptable net return, in accordance with investor requirements, based on an appraisal or one or more broker price opinions, issued no more than 120 days before the date of the short sale agreement.
In the Short Sale Agreement, servicers must give borrowers/homeowners at least 90 days to market and sell the property, or up to one year, depending on market conditions. The property also must be listed with a licensed real estate professional with experience in the neighborhood, and no foreclosure may take place during the marketing period, of at least 90 days, as specified in the Short Sale Agreement.
The Short Sale Agreement also must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received. Servicers may not charge fees to borrowers/homeowners for participating in the program. Servicers have the option to require the borrower/homeowner to agree to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time allowed in the Short Sale Agreement, plus any extensions.
Additional details will be forthcoming. Please check back for updated information as it becomes available.
Larry has over 15 years of experience in Bank Repos and Short Sales and non foreclosed real estate, my clients include General Electric Mortgage, Home Savings, Associates Finance, Transamerica. Current clients include Bank of America, Ocwen Financial Corporation, Countrywide and Keystone Asset Management to name a few. Larry is President of Weichman Associates located in Costa Mesa California. He has sold real estate since 1976 and is a 3rd generation Real Estate Broker. Larry has closed escrow on over 1,000 properties; from townhomes to commercial buildings. This article was provided by the California Association of Realtors. Please be sure to visit us on the Internet at www.TeamWeichman.com, www.OCHomeTracker.com or www.OCRepoBroker.com or you can call me at 714-241-4532