Monday, January 10, 2011

Short-sale incentives revamped again

Here is another great piece on things that are happening in our government that could affect the way short sales are handled in the future. It could really help those that don't qualify for a loan modification.

Here is the article BY INMAN NEWS, MONDAY, JANUARY 10, 2011.

Loan servicers participating in the Obama administration's short-sale incentive program are being given more freedom to pay off second-lien holders, but will be held to stricter timelines for approving or rejecting short sales and forbidden from deducting vendor expenses from commissions paid to real estate brokers.

A new directive from the Treasury Department, which administers the Home Affordable Foreclosure Alternatives Program (HAFA), lifts a cap that had restricted loan servicers to paying second-lien holders no more than 6 percent of outstanding loan balance in exchange for releasing subordinate liens.

It's the second significant revision of the HAFA program since it launched at the end of 2009. Initially, the cap on payoffs to second-lien holders was 3 percent, with an aggregate total of no more than $3,000. The cap was increased to 6 percent with an overall limit of $6,000 in March 2010.

The $6,000 overall limit remains in place, but eliminating the 6 percent cap gives loan servicers more freedom in dealing with second-lien holders when borrowers owe less than $100,000. Second-lien holders -- typically lenders or investors who funded "piggyback" loans -- have been a major obstacle to short sales.

The HAFA program is aimed at distressed borrowers who don't qualify for a loan modification under the Home Affordable Modification Program (HAMP). Before foreclosing on homeowners, loan servicers are instructed to solicit them to determine if they are interested in pursuing a short sale or, if that fails, a deed-in-lieu of foreclosure.

If borrowers are interested in pursuing that option, the new directive gives loan servicers 30 days to send the borrower a short-sale agreement, which spells out list price or acceptable sale proceeds.

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