This announcement comes directly from the National Association of REALTORS® Government Affairs Division 500 New Jersey Avenue, NW, Washington DC, 20001
Responding to the call of the National Association of REALTORS®, on May 14, 2009, the Obama Administration announced incentives and uniform procedures for short sales under its new Foreclosure Alternatives Program (FAP). For borrowers who are unable to retain their home under the Making Home Affordable Loan Modification Program, the servicer may consider a short sale or, if that is not successful, a deed-in-lieu of foreclosure. Participating servicers must comply with program requirements so long as they do not conflict with contractual agreements with investors. Late July is the Treasury Departments current target for issuing guidelines and forms necessary to start the program.
-The problem with this is the servicers participating in this program still have control over the short sale process, they will still be able to delay and control the process without any accountability.
Borrowers (Homeowners).
Borrowers/homeowners qualify under the FAP if they meet minimum eligibility requirements for the Home Affordable Modification program (Streamlined Modification Program) but do not qualify for a modification or do not successfully complete the three month trial period. Before proceeding with a foreclosure, the servicers must determine if a short sale is appropriate.
Incentives.
Incentives include: (1) $1,000 for servicers for successful completion of a short sale or deed in-lieu of foreclosure; (2) $1,500 for borrowers/homeowners to help with relocation expenses; and (3) up to $1,000 toward the cost of paying junior lien holders to release their liens (one dollar from the government for every $2 paid by the investors to the second lien holders).
-This is a great incentive for the servicers, it will also help struggling homeowners with moving expenses. This will also help negotiations with junior lien holders because most junior lien holders are requesting 10% of the amount owed.
Standardized Documents.
The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the short sale option.
-These documents are already standardized, here in California a short sale transaction is no different then any other transaction, it only has one additional contingency. (lender approval of short payoff) CAR has also provided a short sale addendum/short sale agreement.
Property Valuation by Appraisal or BPO.
Servicers will independently establish both property value and minimum acceptable net return, in accordance with investor requirements. The price may be determined based on an appraisal or one or more broker price opinions (BPOs), issued no more than 120 days before the date of the short sale agreement.
-This has been a big problem, since the HVCC (Home Valuation Code of Conduct) went into effect the servicers and lenders set the property value, which is often above what Far Market Value is. This can cause appraisal issues as lenders/investors try to drive home values higher in a declining market.
Time-line.
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. Property must be listed with a licensed real estate professional with experience in the neighborhood. No foreclosure may take place during the marketing period (at least 90 days) specified in the Short Sale Agreement.
-This is another step in the right direction for struggling homeowners who have received a NOD & NOTS, it affords Realtor's familiar with the area extra time to find a buyer. The problem I still see with the short sale process, with regards to time-lines is the amount of time the servicers take to approve the transaction. The amount of time a short sale proposal takes is still a deterring factor for buyers.
Commissions.
The Short Sale Agreement 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.
No Borrower Fees.
Servicers may not charge fees to borrowers/homeowners for participating in the FAP. Program Expiration. The program is in effect through 2012.
Deed-in-Lieu of Foreclosure Option.
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)
-Deeding the property to the servicers may be a good option for primary residence homeowners. The borrower must make sure they are released from all the debt, clarify how this will be reported on their credit report and the shortages fall under tax relief from the Mortgage Debt Relief Act, which investment properties do not.
If your a Santa Clarita Homeowner struggling with your mortgage payment or facing foreclosure, Jennifer and I are here to show you what options you have. Don't pay additional fee's, our consultations are FREE, as a community service we will show how to request a loan modification from your lender, should you meet the guidelines.
As Santa Clarita Realtor's Specializing in short Sales we have the experience and training to provide you with solutions that will minimize your financial loss and limit the damage to your credit history. Contact Jennifer and Gary Ricco, at Keller Williams VIP Properties to schedule a consultation today. 661.290.3837
For Short sale facts follor this link http://www.santaclaritavalleyhomesonline.com once there click on Short Sale FAQ's
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