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The U.S. Treasury has released long-awaited guidelines with incentives for loan servicers and homeowners to engage in short sales. These guidelines were originally announced in May but were delayed due to legal and politic issues. This means that we will see more short sales and fewer foreclosures. Here are some highlights of the new program: Troubled borrowers interested in exploring a short sale will also be allowed to receive pre-approved short-sale terms prior to the property listing. The mortgage servicer must respond "yes or no" to the short sale request within 10 business days. Upon a successful sale, servicers must agree to fully release the borrower from future liability for the difference in the net sale amount and the outstanding loan balance. Troubled borrowers who agree to a short sale or deed-in-lieu of foreclosure will receive up to $1,500 to assist with their relocation expenses. Loan servicers and investors who sign off on payments to subordinate lien holders will earn up to $1,000 for successfully completing a short sale or deed-in-lieu. Subordinate lien holders are limited to recovering no more than $3,000 from sale proceeds, although those who object to the cap can engage in short sales outside the program. Borrowers may still be subject to payback provisions for subordinated lien holders. Examples may include home equity loans, home equity lines of credit, second mortgages or other liens. The guidelines prohibit loan servicers from demanding that real estate brokerages reduce the commission stated in the listing agreement as a condition of approving a short sale. The number of homes headed to foreclosure continues to grow. A record 14.1% of homes with mortgages were at least one payment behind or already in foreclosure at the end of September, according to the Mortgage Bankers Association. Nearly 1 in 10 loans were delinquent, up from 6.99 percent a year ago.
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