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Government Ramping Up New Short Sale Program

(02/10/2010) Short sales have been on the rise over the past six months as many distressed homeowners do not qualify under existing loan modification and home retention programs and as a result they are just looking to get out from under the weight of their mortgage obligation. 

Currently there is a sizeable backlog of both loan modifications and foreclosures in the pipeline and the government and lenders are working in tandem to avoid having these properties hit the market all at once, further depressing prices.  The Treasury Department launched a new program in December 2009 directed towards this goal, the Home Affordable Foreclosure Alternative program (HAFA), was designed to expedite the short sale and deed-in-lieu of foreclosure process sometimes known as “jingle mail”.  The goal is to have this program up and running by the first week of April 2010.  Under the HAFA program, cash incentives will be offered to homeowners, loan servicers and investors.   The hope is to standardize the short sale process much in the way that the Home Affordable Modification Program (HAMP) was meant to simplify the loan modification process.  Hopefully HAFA will yield quicker and superior results than HAMP which has only been marginally successful in converting trial loan modifications into permanent ones.

Under the HAFA program, loan servicers will have specific procedures in place to provide homeowners with pre-authorized price and sale terms before the property is listed for a short sale.  Loan servicers will then receive a $1,000 incentive for every short sale and deed-in-lieu of foreclosure that is completed and investors can receive up to $1,000 depending upon whether there are second lien holders in involved in the transaction who must also be dealt with.  The short selling homeowner may then receive $1,500 under the program to cover relocation expenses.   Once a homeowner is able to provide an executed sales contract, signed by both parties, along with submitting all the required addendums, the loan serivcer will then be given 10 days to accept the terms of the offer.  Overall short sales and deed-in-lieu of foreclosure transactions this year are anticipated to increase over 60% from 2009.


Nancy Osborne, ERATE.com Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.

"I am addicted to Bloomberg TV" says Nancy.

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