The U.S.Treasury Department issued new guidelines for short sales this week that should make the process easier, faster and more consumer-friendly.
A short sale is when the mortgage lender accepts less than what they are owed in lieu of foreclosing on the property. It allows the homeowner to walk away from the property without as bad a mark on their credit and allows the lender not to have to own and then sell the house. Also, sometime properties that are being foreclosed on are damaged or abandoned by the borrowers since they won't be using the home anymore. For more on the advantages, disadvantages or how to go through a short sale, check out another ChicagoNow blog, Love in the Time of Foreclosure.
Here are the key points of the new guidelines, which will go into effect in April as part of the Foreclosure Alternatives Program:
-Mortgage servicers will have 10 days to approve or disapprove a short sale price. This will speed up time and allow the borrower to be released from debt more quickly.
-The borrower will receive $1,500 in relocation credit. This will help move out of the home and into an alternative residence without as much stress or worry about getting into debt again right off the bat.
-Mortgage servicers will receive $1,000, and second lien holders up to $3,000. This encourages them to release the home for a lower price than they may have otherwise.
-Loan servicers will no longer be able to require a reduction in commission for agents or Reators on a short sale. This will make sure agents don't shy away from short sales for fear of not earning as much.
These guidelines apply to principal residences under $729,000. Right now in the Chicago area, short sales account for 8.3 percent of all home sales while foreclosures are 29.7 percent, according to RE/MAX. But the average time to sell a foreclosed home was 117 days, versus 245 days for a short sale. The new guidelines should allow the process to go faster and make short sales a more viable option.
Here's a couple articles that provide more information:
http://www.dsnews.com/articles/short-sale-reforms-receive-mixed-reviews-2009-12-03
www.realestateproarticles.com/Art/10990/264/The-Short-Story-on-Short-Sales.html
2 Comments
Stephanie Walker said:
Maureen, I'm glad you wrote about this because I've been meaning to and haven't gotten around to it. I think these new guidelines are incredibly helpful. It would be amazing to have a short sale approved or rejected in 10 days. Amazing. Such a difference.
The $1,500 credit to sellers for relocation? That was supposed to be around last year. In fact, I tried to find any info I could about it because we would have been eligible for that money. But no one could help me find it. That money would have helped us so much in our relocation. I hope it's for real this time.
These new guidelines seem to be a win for everyone. Banks don't really want to own property, right?
Maureen Wilkey said:
Yes, I've heard from a few people about how long the process can take, and that must be heart-wrenching when you're talking about your home and your credit and your life.
The $1,500 doesn't seem like a lot, but I hate how moving always seems to cost a ton of money. Hopefully it will take the edge off for some people.
And I agree, banks aren't really in the business of owning property, so why not make this easier for everyone?
Leave a Comment?
What your comment will look like:
said: