The Housing Rescue Plan , implemented to help ease the number of struggling homeowners, has added short-sale opportunities. The short-sale addition encourages delinquent borrowers who have not been helped by the loan modification program, and can provide documentation that they have done all they can to make their mortgage payments, in relieving them of their houses through a short sale (when the property is sold for less than half the mortgage owed) to prevent foreclosure.
Under the new short-sale program:
- the servicing bank will get $1,000
- $1,000 can go toward any second loans
- for the first time, homeowners will get $1,500 in relocation assistance
- Lenders will use real estate agents to determine home values. Homeowners will not have knowledge of this figure, but if any offer comes in that is equal to or higher than the value, the lender must take it.
The program provides potential for multiple benefits for all parties involved:
- Investment pools that own many home loans potentially get more money with a sale than a foreclosure.
- Borrowers likely suffer less credit damage while also getting the lender’s assurance that they will not be sued later on for any unpaid mortgage balance.
- And for communities, this means fewer empty foreclosed houses waiting to be sold which depresses the value of the property further pulling down the value of neighboring homes.
The new short-sale program is a stream-lined program that acts an alternative to foreclosure, but it is not simply an opportunity for homeowners to walk away from their houses without having exhausted other resources. Any short-sale must first be approved through the lender in order to qualify for this program. The program is still being fine-tuned with the possibility of further modifications in the coming months. It was initially announced November 30, 2009 and is set to take effect April 5, 2010.
