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More About Short Sales
A short sale can be an excellent solution for homeowners who need to sell, and who owe more on their homes than they are worth. In the past, it was rare for a bank or lender to accept a short sale. Today, however, due to overwhelming market changes, banks and lenders have become much more negotiable when it comes to these transactions. Recent changes in corporate policy and the Obama administration have also improved the chances of getting a short sale approved.
But to be technical, here's a more official definition:
- A homeowner is 'short' when the amount owed on his/her property is higher than current market value.
- A short sale occurs when a negotiation is entered into with the homeowner's mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then 'sold short' of the total value of the mortgage
For homeowners to qualify for a short sale, they must fall into all of the following circumstances:
Financial Hardship – There is a situation causing you to have trouble affording your mortgage.
Monthly Income Shortfall – In other words: "You have more month than money." A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.
This seems simple enough, but it is a complicated process that takes the expertise of experienced professionals. Find a CDPE in your area by clicking here. Together, you can identify all possible options and, when possible, a CDPE can assist you in the quick execution of a short sale transaction
| Treasury to Encourage Short Sales |
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Sep 9, 2009
By Kate Berry The Treasury Department plans to announce financial incentives for servicers to pursue short sales and deeds in lieu of foreclosure for troubled homeowners who do not qualify for the Obama administration's loan-modification program. In a short sale, a home is sold for less than is owed on the mortgage, whose holder accepts a discounted payoff. It is often considered less costly than a foreclosure. Under the Treasury plan, which is expected to be announced this month, servicers would get a $1,000 "success fee" when a short sale is completed, according to short sale experts who have been briefed on the policy. The home seller would receive up to $1,500 to assist with relocation expenses, similar to the "cash for keys" programs that various servicers offer. Treasury officials are working with an advisory committee to determine how to accommodate the holders of second liens, which have been a big hurdle to completing short sales. Much of the debate around short sales is centered on whether the holders of second liens will receive a fixed amount or a percentage of the short sale price. "Second liens have been a considerable problem for short sales," said Matt McCabe, the president of Loan Resolution Corp., a Scottsdale, Ariz., company that helps lenders work out defaulted mortgages. Currently there is no uniform policy for banks to accept a payoff for a second lien in order to complete a short sale, McCabe said. Many of the largest banking companies have adopted their own internal policies, which vary. For example, in March, Bank of America Corp. adopted a new policy requiring that 5% of the short sale proceeds go to pay the second lien in situations where there is no equity available, particularly for standalone home equity lines of credit. (B of A's old policy required that 10% of the balance of the home equity loan be paid.) A Treasury spokeswoman, Meg Reilly, confirmed Thursday that a directive on short sales will be issued this month but she declined to provide details. In April, Treasury said it planned to offer incentives for short sales the following month, but the policy has taken took longer to implement.
http://www.americanbanker.com/issues/174_173/treasury_to_encourage_short_sales-1001787-1.html
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