New Government Guidelines Address Short Sales
The federal government has released new guidelines that are aimed at speeding up the short sale process to help homeowners avoid foreclosure. The new rules issued by the U.S. Treasury Department at set to take effect on April 5, 2010.
Distressed Mortgages and Short Sales
Homeowners who have trouble making payments on mortgage loans may be able to avoid foreclosure by arranging a short sale. A short sale occurs when a mortgage lender allows a homeowner to sell a home for less than the amount of the mortgage.
If you use a short sale to get rid of a troubled home loan, it can hurt your credit score. For instance, your Vantage score would fall about 120 to 130 points, according to a Baltimore Sun article. Vantage scores are put together by the three credit bureaus, but aren’t used by lenders. However, they are a good indicator of what your FICO score would be.
Home Loans and Deed-in-Lieu
The program also allows qualified homeowners to complete a deed-in-lieu. That involves giving your home back to the mortgage lender to avoid foreclosure. A deed-in-lieu affects your credit score about the same as a short sale.
Incentives for Short Sales
The new guidelines offer incentives for borrowers, servicers, and investors to complete short sales and deed-in-lieu deals. Incentives include:
- Mortgage loan servicers may receive up to $1,000
- Borrowers may receive up to $1,500 in relocation expenses
- Second lien holders may receive up to $1,000 to release their claims
Improved Documentation
The program also aims to standardize the documentation for short sales to outline the rights and responsibilities of all parties involved. Specific timelines for completing deals are to be included. In many cases, short sales have taken many months to complete, and in some cases the deals have fallen apart.
Selling Properties
Mortgage loan servicers are required under the new rules to give borrowers at least 90 days to market and sell their properties. Homes must be listed with a licensed realtor. Foreclosures are not allowed to occur during the marketing period if the seller is making a real effort to sell a home.
Tags: home loans, mortgage, mortgage lender, mortgage loans, mortgages
