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Government Gives Props To Short Sales

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Article by Pat Precourt and Bob Lachance

We have been watching our government lay-out plan after plan to stabilize the housing market. Finally – we are hearing parts of the puzzle that make sense.

The U.S. Treasury Department, in a recent press release, has encouraged homeowners and servicers to do short sales as an alternative to foreclosure for all borrowers that are not eligible for a modification. They have even outlined a process by which the short sale process should be handled, indicated the use of standardized forms, and injected incentives for the borrowers and servicers.

The following points regarding the suggested short sale policies have been pulled directly from the recent Department of Treasury Press Release:
http://www.treas.gov/press/releases/docs/05142009FactSheet-MakingHomesAffordable.pdf

Here are some of the policies outlined:

  • All borrowers that are not eligible for a MHA modification plan should be encouraged to do a short sale because it has less of a "negative impact" on the borrowers, lenders, and the community.
  • Short sales have been historically so complex that often a foreclosure is pursued even though a "short sale… would have provided a substantially better outcome for borrowers, investors, and communities."
  • Servicers will receive a $1000 incentive for successful completion of a short sale.
  • Borrowers will receive up to $1500 for moving expenses.
  • Junior Liens will be offered an extra $1 for every $2 that the investor is willing to pay at a $1000 max.
  • Properties may be evaluated prior to receiving an offer to establish value and minimum net required.

Currently more than 75% of all the mortgages in the country are covered by the new Making Home Affordable guidelines and that will include these new short sale rules.

With over 48% of all ARMs in default, or full foreclosure status, and the highest foreclosure rate in four years being hit just last month (April 2008, 1 in 374 homes foreclosed; RealtyTrac), combined with these new policies… we are going to see a greater need for short sales than ever projected!

These new guidelines could not come at a better time. We expect for the process to become easier and easier and for lenders to become more and more systemized and agreeable which in turn will give us a great opportunity to create and maintain a highly profitable Preforeclosure/Short Sale Company for at least the next 5 years!

Pat Precourt and Bob Lachance are regular guest speakers at CT REIA. Go here for the current list of upcoming real estate investing seminars in Connecticut.

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