Short Sales - US Treasury Increased Support
The US Treasury Department on November 30th announced plans on how to streamline Short Sales. Most agree, although the administration continues to spin it as a success, that the Making Home Affordable program has been less than optimum. Over 650,000 temporary loan modifications have been approved yet much fewer have been approved for permanent modification status, and stories abound of homeowners in the temporary modification status being foreclosed upon with no explanation. Here is a summary recap of the changes that have been enacted:
Qualifications:
- Must be the homeowner’s principal residence
- The mortgage must be less than $729,750
- Homeowner is delinquent on the mortgage or “default looks likely”.
- Homeowners mortgage payment exceeds 31% DTI based on gross income.
- The Loan must have closed before 1/1/09.
The qualification of “or default looks likely” seems to indicate that the borrower does not have to be in default in order to qualify for a short sale, just that a default “looks likely”. It will be interesting to see mortgage servicer responses, and Treasury’s enforcement, to short sale requests when a default “looks likely” but the borrower is not yet late.
Changes Enacted:
- $1000 to lenders.
- $1500 to sellers for closing costs or moving expenses.
- Up to $3000 to junior lien holders for release of their lien.
- A minimum of 90 days and up to 1 year to market and sell the property.
- No foreclosure may commence during the marketing period allowed above.
- Servicers may not lower agent commissions after an offer is received.
- Standardized paperwork
- Servicers may not charge borrowers fees to participate.
- the Short Sale Must Fully Discharge the borrower !!!!
- A Short Sale request is to be approved or denied within 10 days.
This is very positive news for short sale investors as it shifts emphasis toward short sales, allows a defined marketing time without risk of foreclosure to the borrower, prevents reductions in realtor commissions, drastically shortens time frames, fully discharges borrowers, and apparently allows for submission prior to being in default.
Comments (5)
Nice summary... does anyone know who is enforcing this? Who do we call when the banks are still taking months to respond?
Sean Buell - Realtor, CRS, over 16 years ago
Ed, I agree. Some incentives from the government, especially along the lines of lower down payment conventional loans, for buy and hold landlords would help move both bank REO inventory and short sales. However, these US Treasury actions will help homeowners in trouble, buy and hold investors, and even more so short sale flippers.
Ted Akers, over 16 years ago
What about homes as investments? So far, all I hear about is the benefit for owner-occupied homes. But the truth is most investors are no better off than the average resident homeowner. Why are we considered like fat-cats who have deep pockets and can afford to pay our mortgages despite soaring costs, expensive repairs, and increasing vacancy rates?
Ed, over 16 years ago
Thanks Josh. I appreciate it.
Ted Akers, over 16 years ago
Great summary, Ted. This post has been included in the BiggerPockets Newsletter for today, Sunday 12/6/09.
Joshua D., over 16 years ago