Government Program to Address Short Sales & Deed-in-Lieu

(11-02-09) In addition to promoting loan modifications, the government also hopes to address short sales and deed-in-lieu of foreclosures through the Making Home Affordable program.

Under the plan, which has yet to be finalized, mortgage servicers will be offered financial incentives to offer distressed homeowners the option of pursuing a short sale or deed-in-lieu of foreclosure, where the borrower simply hands over the keys to the lender and vacates the property in an orderly manner.

The short sale and deed-in-lieu program have proven to be complicated to implement because of the prospect of second lien holders being involved who must have their rights addressed in this process.

The primary concern of lien holders in second position involves the amount of compensation they will be entitled to receive.

The government wants to establish a ceiling on the amount of compensation offered in the hopes of eliminating a long and protracted negotiating process between the lender(s), investor, borrower and servicer.

In the end, it is thought that many lenders in second position may prefer to cooperate under the government program, cut their losses and walk away from a property, rather than take over the payment on the first mortgage and then foreclose on the property themselves.

Home owners getting paid for short sales

Government Ramping Up New Short Sale Program

Continued at Mortgage Modification Madness Part II

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