This article, from the Sun Sentinal, does a good job explaining this:
The number of homeowners completing short sales rose sharply across South Florida in 2010, but not necessarily because of federal guidelines that went into effect last year.
Real estate agents and housing analysts say the increase in short sales is largely because of problems in the foreclosure market and changing sentiment among lenders.
Many potential buyers have steered away from foreclosed homes since foreclosure freezes began last fall, concerned that the deals would be delayed or canceled while lenders investigated possible wrongdoing by so-called robo-signers. As a result, banks have been more willing to approve short sales.
Even without the effect of moratoriums, lenders have warmed up to short sales, realizing they can dispose of properties more quickly and make $30,000 to $50,000 more per sale than they could by foreclosing on a home, said Peter Zalewski, principal at CondoVultures.com, a Bal Harbour-based consulting firm.
"My experience was very positive," said Fernando Incarnacao, 54, who recently arranged a short sale on his three-bedroom Parkland home. "I'm very happy with the outcome. Now I can kick back."
He owed about $321,000 and hoped to avoid foreclosure, so he listed the home with real estate agents Michael Citron and Rosy Baron. They worked with lender U.S. Bank to complete a $230,000 deal that closed Jan. 5 after less than four months.
There were 16,767 short sales in Broward, Miami-Dade and Palm Beach counties last year, up 49 percent from 2009 and 437 percent from 2008, according to CondoVultures.
In a short sale, the homeowner gets approval to sell the property for less than the amount owed on the mortgage, and the lender typically forgives the difference.
The transactions are seen as a key to reducing the massive inventory of available properties, which will go a long way to solving the nation's housing woes, now heading into a sixth year.
Short sales are one of the only viable options for "underwater" homeowners who need to move.
In the past few years, though, sellers and buyers complained that lenders took several months or longer just to consider short sale offers. Frustrated buyers walked away during the delays, and properties lingered on the market, prolonging the housing slump and the recession.
To address those concerns, the U.S. Treasury last spring introduced a voluntary program called Home Affordable Foreclosure Alternative, which included guidelines for short sales.
Eligible properties must have been purchased before 2009, have a mortgage that is delinquent or expected to go into default, be the borrower's primary residence and have a total monthly mortgage payment greater than 31 percent of the borrower's monthly gross income, among other requirements.
If a home qualifies, participating lenders must approve or deny offers within 10 business days.
In return, sellers, loan servicers and investors who own the mortgages receive financial incentives from the government for completing the deals. Sellers don't have to repay any of the remaining debt and also get $3,000 in moving expenses. Servicers get $1,500, while investors owning the first mortgage receive a maximum of $2,000 for allowing up to $6,000 of sale proceeds to be distributed to less senior mortgage holders.
The guidelines were supposed to take effect by April 5, 2010, but some lenders didn't start following them until the summer, Treasury spokeswoman Andrea Risotto said.
"It's still pretty early in the program's life," she said.
Some real estate agents remain skeptical.
Terry Story, a real estate agent for Coldwell Banker in Broward and Palm Beach counties, said the Treasury program hasn't helped her clients.
"I haven't heard of any success stories with it," she said.
Douglas Rill, an agent for Century 21 America's Choice in West Palm Beach, said the government rules aren't making as much of a difference as a new automated computer system used by banks to expedite short sales.
Joe Kohn, a Fort Lauderdale lawyer, agrees that some banks are getting better at executing short sales. Still, no lender that he has worked with on a transaction has met the 10-day deadline.
"There's no 10 days," Kohn said. "That's not how it happens."
Two of the nation's largest lenders insist they follow the government guidelines.
A spokeswoman for Chase said in an e-mail the lender responds to so-called bona fide offers within 10 days "under normal circumstances." Bank of America responds "well within 10 days" for short sales approved under the program, spokeswoman Jumana Bauwens wrote in an e-mail.
If a property doesn't qualify for the program, lenders aren't subject to the 10-day deadline and don't receive the incentives. In those cases, deals still tend to drag or fall apart.
First-time buyer Martin Austin said he offered $84,900 for a two-bedroom villa last fall in Boynton Beach.
Austin said the lender, Bank of America, didn't respond for more than 80 days. When it did, the bank said it wanted more money for the house -- $104,000 – and the sale collapsed, Austin said.
Bauwens said the property wasn't eligible for the short sale program, but she denied it took so long for the lender to respond.
Austin, 49, a waiter, eventually found another home in the same development for $89,000, and he hopes to buy it this month. But he still can't get over his earlier experience.
"It was a total shocker," he said. "I had stopped looking at homes and everything. I couldn't believe this was happening."
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