New Regulations Give Banks More Incentive to do Shortsales
Feb 27th, 2010 | By BlogMaster | Category: Shortsales - ForeclosuresShould you consider a shortsale in light of new federal regulations?
There are new federal regulations affecting shortsales
A shortsale is where you work with your lender to actively market your home and sell it for less than the mortgage balance. The buyer gets a home at a great price, the bank doesn’t have to absorb the expense of a foreclosure and you can walk away with only a minimal hit on your credit — much less than if you had gone into foreclosure.
But the banks have been playing Three Stooges with the handling of shortsales. The banking industry had its own guidelines that required them to respond to shortsale offers in 45 days. Unfortunately, they weren’t even able to do that in many cases.
Now new federal rules will require lenders to respond to all shortsale offers in 10 business days. That makes shortsales a very real option for many. Florida’s Sun Sentinel reports that 20 percent of houses in certain parts of the state have been shortsales, while more than 40 percent were foreclosures.
As part of the new federal regulations, banks will get a kickback from the feds to push shortsales through in the 10 business days. Another federal subsidy of the banks?! Yes, but this one could actually save taxpayers money by averting foreclosure.
Source: The Clark Howard Show on CNN
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New short sale regulations could prevent foreclosures for households with mortgage payments that exceed 31 percent of their income and received home loans for $729,750 or less before January 1 may benefit from speedier short sale regulations.
Under the Home Affordable Foreclosure Alternatives (HAFA) Program, lenders will have 10 days to accept or deny short sales from qualified individuals. If they are approved, these borrowers may be relieved of their remaining debt and receive as much as $1,500 to cover the cost of moving.
In addition, lenders will receive a $1,000 incentive per short sale. Institutions that hold second mortgages may be entitled to as much as $3,000 from the sale.
The program was created to address the problems associated with the drawn-out short sale process, which has allowed many lenders to deny homeowners this option at the last minute and potential buyers to walk away in frustration.
HAFA will take effect on April 5, 2010 and be available through next year, according to the National Association of Realtors.