Banks have really sped up the process, hiring large numbers to serve the short sale specialty. In early 2010, one of the very largest banks had more than doubled the number of home short sales it approved, sometimes as quickly as 24 days. Compare that to last year, when short sales stalled indefinitely or took more than six months to complete.
The biggest roadblock to approval was often a second mortgage held by the seller. Since the primary lender must be paid first, the second lien holder could be left with nothing, and they would basically kill the sale. But now the Home Affordable Foreclosure Alternatives (HAFA) program provides money to primary lenders who share the proceeds with the second lien holders. HAFA also provides up to $6,000 to those secondary lenders if they release their claim.
Short sales keep borrowers out of foreclosure and reduce the impact on their credit. While foreclosure can shave 200 points off your score, the penalty for a short sale is only half of that. Hopefully, a boom in home short sales will also bring us closer to ending the ongoing foreclosure crisis.
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