Help with the Short Sale Situation

New Short Sale Incentives

The Treasury Department has come out with some new incentives to try to make the process of a short sale palatable to all parties involved. The program will begin April 5, 2010. Under what is called the Home Affordable Foreclosure Alternative Program, the servicer (lender) will receive a $1500 incentive and the homeowner could receive $3000 when a short sale or deed-in-lieu of foreclosure transaction is completed. The $3000 is a ‘carrot’ for the seller to at least attempt to do a short sale instead of just walking away. The Treasury Department has also increased the amount that the second (subordinate) lien holder can receive. The have increased that amount to up to 6% of the loan amount with a cap of $6000. These second mortgages would then be extinguished under this new HAFA program.

I closed a short sale just today so this information is hopeful for other people like my clients. I had the property listed for two years before we were able to get the bank to allow us to complete a short sale. As we were at the signing table I felt the need to make a phone call to my attorney regarding something the client had brought up regarding collection activity by their second lien holder.

The attorney told me that unless the second lien holder pulled the collection activity back from the agency they had placed it with my clients would still be responsible for the amount of the second lien regardless of what our contract stated. Needless to stay I jumped on the phone with the collection agency and verified that the collection activity indeed had been stopped and that the account was back with the original lien holder.

After many emails and lots of questions I was able to find out that the lender indeed could give us a full release of the property as stated in the offer and that my clients would not have any deficiency judgment against them. Had we not done that it was possible that the entire second lien could have been still held against my clients personally even though the property had been released from it.

I am getting ready to take another short sale listing in the next week or so. I am hoping that the April 5th deadline helps me with communication as I begin to try to put together another puzzle.

If you want to know more about short sales and if you and your property qualify for one, please feel free to drop me and email at jan@valleysavvy.com or give me a call at 541.944.6040. I will be happy to sit down with you and discuss all of your options with you. Until then, I love this quote by Christopher Robin when he was talking to Pooh….Promise me you’ll always remember: You’re braver than you believe, and stronger than you seem, and smarter than you think.

To me that is a good motto to live by in this economy!