Lasvegasmtg.com reports that the Treasury sets new rules for Short Sales process that will be effective April 5th 2010. While these new Treasury rules for the short sale process is meant to standardize the process it is voluntary until April 5th, 2010. The new rules are expanding on the little used 2009 Home Affordable Foreclosure Alternative or HAFA which was set in place to halt or slow down the Foreclosure process. This process is is specifically designed to help the primary residence home owner that is unable to get a loan modification and provide an alternative to foreclosure, by providing the ability to either to do a Short Sale or a deed-in-lieu of foreclosure.
The new regulations are meant to simplify the Short Sale Process and to provide alternatives when a Loan Modifications are unsuccessful while providing incentives to the borrowers, servicer and the investors.
Summary of Changes and Procedures for a Short Sale:
- Must be Owner Occupied Property and unable to qualify for Loan Modification with its lenders.
- Borrowers must have taken the loan out prior to January 1, 2009 and be in arrears or at risk of being in arrears in the opinion of the lender.
- The total housing expenses exceeds over 31% of borrowers total monthly income.
- Loan amount can not exceed over $729,750.00
- Borrowers would be entitled to $1,500.00 for relocation costs upon vacating the property in a clean condition.
- Servicer would be entitled to $1,000.00 for agreement to the Short Sale or deed-in-lieu.
- Lenders would be entitled to $1,000.00 for the agreement to the Short Sale or deed-in-lieu.
- Second Lien holders would be entitled up to $3,000.00 for Short Sale or Deed-in-lieu approval.
- Lender must agree to waive the right to any deficiencies judgments and release the deed promptly upon completion.
Under the new Treasury rules for Short Sale the lenders must advise the borrowers of the alternatives when inquiring about a loan modification or Short Sale.
- Short Sales forms will be mailed out to the borrowers and must be returned within 14 days to the lender to start the Short Sale process.
- Lender will allow the sellers to list and sell the house within 120 days, and provides extensions up to 12 months.
- Lenders would be required to respond to any contract offers within 10 business days.
- Real Estate Agents fees or commissions cannot be reduced lower then the contract fee agreement as long as it does not exceed 6%.
Under the new Treasury Short Sale changes it allows the Short Sale process to start before a purchase contract offer has been submitted. It creates a time-line on how long after the purchase contract has been submitted for the lenders to respond. It allows for Foreclosures to be initiated but cannot proceed while in the Short Sale process. It provides incentives with all parties to negotiate in good faith. It protects the Real Estate Agent from the banks renegotiating their commissions. It is a better alternative to the Foreclosure process, but time will tell if this is just a band aid placed on a severed artery or true triage.