BiggerPockets

Ted,

Great post.

Question:

Is it safe to say that a deficiency judgment on a seven figure short must still be negotiated away?

Anthony,
Thanks - I appreciate that. I say yes, you do need to negotiate full release for 7-figure deals because the qualification is for deals under $729,750. I still suggest for deals under the $729,750 to submit a similiar short sale package as before with cover letters stipulating a full release of the homeowner. One reason is it seems like it may be interesting following these changes and how the banks actually adhere to them, and more specifically how Treasury enforces them. Do not get me wrong. I think these are very welcome changes with the intent definately to push short sales as opposed to allowing the property to get all the way to REO status. One interesting provision to follow though will be the acceptance or denial requirement of within 10 days. Many banks are not staffed now to get responses inside 60-90 days. How are they going to comply with a ten day requirement? Again, these are very welcome changes we will want to monitor to see their effect. I think it is important for investors to be aware of them; as we mey need to remind banks of these new parameters, especially early in the game. Bottom line - these changes are very good news. Reality (especially regarding time frames) - we will have to see. Having knowledge of the changes when dealing with the banks - should prove valuable versus less informed short sale shops. I suspect knowing of the changes could result in us reminding the bank of the new rules.

Lucia,
My read from several articles did raise the same question, in that most articles do describe Treasuries actions as "Guidance". However, these are reported as rules to become effective 4/5/2010. Beginning next week Treasury has stated they will publish results of banks not following the program guidance. I know that few of us think that "shaming" banks into action is likely to have material impact. While none of the articles discussed penalties, I presume that at a minimum the financial incentives from Treasury would be withheld. Some high paid official somewhere figured out that short sales actually cost less than proceeding through foreclosure with legal fees and another 4-12 months of holding the property without recieving payments. While not a cure-all, and like many government programs without real teeth, it is at least a public move to encourage short sales. As to banks cooperation for now, or compliance after 4/2/2010, or Treasury Dept. enforcement we will have to see.

Jawsette,
Even though they are spinning the Loan Mod program as a success, I think they are realizing it is not the cure-all they had hoped. There seem to be many complaints including serious delays in processing and borrowers being routed into foreclosure after being approved and paying on their temporary "approved" modification. The most telling number is that only 1,700 homeowners have completed the temporary modification and moved into a permanent modification status.