Guidelines Aiming To Ease Short Sales
Jan 8, 2010 I Don't Like to Work
By Ruth Simon, The Wall Street Journal
The Obama administration laid out final guidelines on
Monday that should make it easier for some financially
troubled borrowers to sell their homes.
The guidelines are designed to encourage the use of
short sales, transactions in which the borrower with lender
approval sells the home for less than what is owed on
the loan. The program also makes it easier for borrowers
to voluntarily transfer ownership of properties through a
“deed in lieu of foreclosure.”
Short sales can result in higher prices than foreclosures
and can be less damaging to local neighborhoods,
in part because homes aren’t left vacant and exposed to
vandalism. But these transactions are often difficult to
complete.
Under the plan, borrowers will receive $1,500 from
the government if they sell their homes for less than the
amount of their mortgages. Mortgage-servicing companies
will also receive $1,000 for each completed short sale.
The program is open to borrowers who may be eligible
for the government’s loan-modification program, but don’t
end up qualifying, or are delinquent on their modification,
or request a short sale or deed-in-lieu transaction.
The short-sale program is the latest addition to the Obama
administration’s $75 billion foreclosure-prevention plan,
which includes incentives for mortgage companies
and investors to rework troubled loans. The government
first said in May that it would include short sales in the program,
but it has taken months to finalize the details.
Under the new guidelines, second-mortgage holders can
receive up to $3,000 of the sales proceeds in exchange for
releasing their liens. Investors who hold the first mortgages,
meanwhile, can collect up to $1,000 from the government
for
allowing such payments.
Borrowers who complete a short sale under the program
must be “fully released” from future liability for the debt,
according to the guidelines.
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January 8th, 2010 at 4:04 pm
Excellent!!!! I can’t wait…Obama is doing a good job.
January 8th, 2010 at 4:06 pm
Hmm. Obama is the man.. He is helping eveyone out in this country..
I know just about every homeowner who is in default is gonna jump at the chance to pay a 3rd of their income to a house they are losing..lol
January 8th, 2010 at 4:06 pm
DEAR SIR , I LIVE IN CANADA , I AM INTERESTED IN WORKING IN SHORT SALES . WOULD YOU PLEASE HELP ME TO GET MONEY FROM THE GOVERNMENT US OR CANADIAN . CAN I OPERATE THIS BUSINESS VIA A COMPUTER & INTERNET CONNECTION . THANKS . RAMZY ISSA .
January 8th, 2010 at 4:07 pm
It’s about TIME! This will speed up the process and allow for MORE deals to be approved. Short sale deals are practically falling in my lap!
http://www.WholesaleAssets.net
January 8th, 2010 at 4:10 pm
WOW. Since I don’t have private lenders this is a great opportunity.
I just hope there is gobs of govt. paperwork and numerous guidelines, etc. to make this work.. Let’s keep Chris Dodd and Barney Frank away from this program!!!
January 8th, 2010 at 4:24 pm
We’ve all been talking about this for years now- glad its finally happening. Best of luck to everyone getting it done!
January 8th, 2010 at 4:30 pm
GSE’s do not have to abide by these rules…
ESPECIALLY in California… where what 60-70% wouldnt fall under this category…
Plus it won’t go into affect until 4/5/2010 I believe… This is a joke… HAMP and HAFA will not do anything…
Look at what the loan mod initiative did…
I won’t get soo excited over this..
Jeff Coga
The Samurai
January 8th, 2010 at 4:32 pm
I would like to know where I can read the “official” notices to be able to have some clout when I speak to borrowers and lenders and also to have the complete program information.
Thanks!
January 8th, 2010 at 4:35 pm
wow this will help the economy move and we’ll all pay for it in the long run . I need to pay my late mortgage so i will sell it. Then i too can feed this socialist/narcisist beast
January 8th, 2010 at 4:42 pm
Have they fixed the tax problem with short sales? It’s not like you can BK federal taxes on short sale “gains”.
January 8th, 2010 at 4:49 pm
Rafael,
I doubt this will speed up the process – if anything it will fill the pipeline with thousands more short sales and swamp the servicers. $1,500 is a lot to a homeowner with no cash, ut $1,000 to a servicer is chump change.
Let’s face it – most short sales are submitted by amateurs that make it worse for us experienced investors. Hopefully this won’t make wait times worse!
Don’t get me wrong – it’ll definitely make it easier to get the deals, but when has gov intervention helped?
http://www.HomeBasedBusinessDoneRight.com
January 8th, 2010 at 4:57 pm
Obama is a moron. His prior program didn’t/doesn’t work and this won’t either. It’s insulting to all of our intelligence to think that the government is going to give us money (our own, they raise taxes on us and then show up to be the metaphoric white knight who will save the day by giving you money to “help”) to get us out of a problem they created by making banks and lenders lend money to people who couldn’t afford to borrow it. Use your heads people! I’m all for investing in real estate, doing short sales, owning property and all the other ways of making money. But imagine if the government and Obama would get the hell out of the way, what we could do!
January 8th, 2010 at 4:57 pm
Read the HAMP program http://www.macedesigns.com/clients/srec/HAMPsd0909.pdf
This program will require the homeowner/seller to stay in the house for up to 120 days to avoid foreclosure and as long as they market the house for the amount the lender tells them. They must sign a document agreeing to the terms and send all the required paperwork within 14 days. They must continue to make monthly payments up to 31% of their gross monthly income. They also must negotiate with the junior lienholders themselves. If they can’t get the house sold they give the house back to the bank via Deed in Lieu.
How many people will want to agree to continue paying if they are in a hardship situation? What does the $1500 do if they just paid more than that to the bank while waiting to get approved for the short sale? Most people I work with aren’t occupying their house (vacant). There’s really so many reasons that this is not going to be a good program.
January 8th, 2010 at 5:03 pm
Good idea in principle, but will not happen under current conditions. Banks are relying on mortgage insurance to cover their losses until sufficient returns are actualized. Then, and only then, the properties are sent to open market. Currently, if you go to a “foreclosure auction”, you’ll find most properties have reserves much higher than market value, then the house goes back to the institution, where they collect on the Mtg Ins… Short sales are being denied at alarming rates. Don’t believe me, just ask your neighbor who has been in the process for over 6-9 months. It is even worse for those trying to establish principal reductions. We are by no means “out of the woods”, and this is simply lip service.
January 8th, 2010 at 5:13 pm
Can you post the link? Is this the HAMP modification passed on Dec 16th (42 pages)
PatF is right…people who do not know where to start muck the whole process up! Low dough BPO is a must!
January 8th, 2010 at 5:19 pm
halo halo halo halo………
January 8th, 2010 at 5:19 pm
I WANT IN
THANK YOU
SEE YOU AT THE TOP
GMONEY
January 8th, 2010 at 5:27 pm
If your really serious about shorting your home, and you need time, but your broke, in both judicial and non-judicial states you can file a lawsuit in district court “Pro Se”, which means your representing yourself. And if you don’t have the cash for the filing fee, file a request ” In Forma Pauperis”. It means just like it sounds, your a pauper. Then get your paperwork together for a short sale request. The other alternatives are:
1) Cash offer on the home
2) Request for Loan Modification
3) List it on MLS as a short sale with an agent. Communicate to lender what your doing.
4) Quick stop is a lis pendens, notice of legal action.
Final note, you don’t stand a chance of being successful in this business unless you can outright buy the property for cash, and if necessary hold it 90 days or longer.
January 8th, 2010 at 5:27 pm
Very important omission in the report. This program is voluntary. Banks who see there is more money in pursuing mortgage deficiency judgements, who see they can sell this debt to debt collectors, have upfront promisory notes on file will find more buckets of gold by continuing to stall until foreclosed or pillage and plunder through mortgage modifications. The only solution is to compel banks to adjust principle for existing homeowner if they have the income.
January 8th, 2010 at 5:31 pm
Very important omission in the report. This program is voluntary. Banks who see there is more money in pursuing mortgage deficiency judgements, who see they can sell this debt to debt collectors, have upfront promisory notes on file will find more buckets of gold by continuing to stall until foreclosed or pillage and plunder through mortgage modifications. The only solution is to compel banks to adjust principle for existing homeowner if they have the income.
Rich, sounds like you’ve been very intimate with the process. You are ’spot on!’
January 8th, 2010 at 5:50 pm
This is not investor friendly or supportive. There are additional disincentives to this program: the homeowner is responsible for handling all of the negotiations with all junior lienholders. The homeowner is supposed to be paying off junior lienholders while making reduced mortgage payments to the loan servicer and while marketing the property for a short sale.
Also, new obligations and very tight time restrictions are placed upon listing agents and brokers that work with homeowners under this program.
Moreover, the buyer (read: “investor” in our business) must agree to not resell the property for 90 days.
Thankfully, this is not the exclusive and mandatory short sale process when it becomes effective as of May 2010. It is only one of the options available for homeowners. Considering these issues, the non-governmental approach sounds better for all involved.
January 8th, 2010 at 5:56 pm
Cash is still KING ! My offers are never the first selected…but we do end up with alot. Thank you for Self-directed IRA’s and good note brokers!
January 8th, 2010 at 5:57 pm
Umm… isn’t this the program that Jeff Watson has been condemning? I think it was called HEFA or HEPA or something like that. Just wanted to double check on that since if it is that program, most will fail just as they did with the loan modification programs. In fact, Jeff mentions why it was designed to fail. Please advise.
January 8th, 2010 at 6:02 pm
I have known of this since early summer and am waiting for April for its implementation. Should be ideal for homeowner & give banks incentive to approve quicker so Short Sale specialists like me can close sooner. Thanks & keep us informed! Equity Services of America.
January 8th, 2010 at 6:09 pm
No need really worry about this if your business model is focused on short sales.The HAFA program does not apply to Fannie Mae and Freddie Mac loans.
Those entities are supposed to be developing their own unique short sale program (to add to the confusion).
HAFA is only for HAMP servicers that ELECT to implement HAFA and submitted their election by the end of the year.
January 8th, 2010 at 6:12 pm
We also need to consider that lenders are restricting the transfer of title, which in my opinion is a violation of the 14th Amendment. Since when does the Uniform Commercial Code (UCC)trump the Constitution? A cash transaction should never, under any circumstance, have a restriction on resale. Programs like these are smoke and mirror tactic’s, that never resolve the core issue, (negative equity) or hold accountable the entites responsible (loan originators/ Appraisers). Short sale investors are an integral part of the solution, not the problem. These dummies need to realize that we provide a service to them, (negotiate the negative equity away) and sell the property for a profit, most likely to a “buyer” who needs financing, thus restarting the cycle. Now they want to restrict the spread on resale. Which goes directly against our 14th amendment rights. Our supposedly unalienable rights? Its a poser program that sends a false message and solution to the public that our government is doing something.
January 8th, 2010 at 6:14 pm
This is just poltical jargon. I have yet to meet anyone who is stuggling and not behind in their payments to obtain a loan modification or a successful short sale. A person must ruin their credit before they can get any consideration for a loan mod or short sale program.
January 8th, 2010 at 6:19 pm
Ron..your website & service is what I need. Are any east-coast lawyers on board? DE-MD
January 8th, 2010 at 6:22 pm
Your kidding right!!! Aren’t you tired of reading agent blogs touting an effortless and blissful future for short sales.
The HAFA program details released on November 30, 2009 have been sitting on my desk collecting dust the last two weeks. I excitedly sat down with a highlighter so I could give our readers a cliff-note breakdown of all the “benefits”. But they just are not there!
The program comes with to many flaws. Proponents point to the commission ‘protection’, systemized paperwork, and a unified set of ‘guidelines’ as the answer to our short sale woes.
Aren’t these the things we were asking for? But wait…..I can’t seem to recall asking for the government to waste my tax money on an ineffective program that will merely muck up an already tough process that will be twisted and loop-holed by everyone anyway.
January 8th, 2010 at 6:28 pm
The problem seems to me that lenders in second or 3rd position are hardly going to get revved about $3000 bucks if they are owed a substantial amount, especially if that money is conditioned on foregoing the right to pursue the borrower later. If this whole program is so great the lenders would be rushing em through. That’s hardly what I’m finding. Lastly, if you aren’t telling your customers they may be liable to 2nds and 3rds in the absence of securing a full release, you’re a slimeball.
January 8th, 2010 at 6:55 pm
I need help i need customer and don”t know how can you help me.
January 8th, 2010 at 7:10 pm
Wondering what will this mean for CA short sale owners? Will they still get hit with 1099’s?
January 8th, 2010 at 7:14 pm
Beware the new Plan…to my understanding lenders are not required to come on board with this and it is volunary…did you wonder why BOA paid back their tarp funds…they did not want to be forced to play by the govment rules…
January 8th, 2010 at 10:19 pm
Establish your own guidelines. Seize your own benefits. Don’t wait for the Feds to give you your money back. The only money they have was yours first.
January 9th, 2010 at 5:30 am
Obama’s giving away our money like water. We’ll pay in the long run. The economy is slow because people don’t have confidence in our government and never will as long as we have a Muslim terrorist in the White House.
January 9th, 2010 at 6:59 am
So where are the details for this program??
January 9th, 2010 at 12:19 pm
John
It’s people who have an attitude like yours that makes this world so negative. Why can’t people just try to make things work and support our president. These problems were here when he came in. He is trying to make a difference and TRUELY HELP PEOPLE. This all comes down to helping the homeowner doesnt it or like John I feel he is in it just to put more money in HIS pocket. If the president had some support I think any program could work. We just all need to stop being so NEGATIVE!!!
January 9th, 2010 at 2:38 pm
Sam,
Are you kidding me? Have you read the program!??!?!?!
What we NEED in this country is for people who understand the problem… be so negative?!?!? So you want me to be patriotic and just say no problem Mr. Obama… sounds like something else other than a Republic…
Answer me this…
HOW IS GOING TO HELP THE PROBLEM?
The problem is liquidating the bad debt… not squeeze every little bit of money from the homeowners… just to short sale the property!
READ IT! 31% of income just to make it a short sale… RIGHT. NO homeowner will pay that… Oh by the way you have to sell the property at what the bank tells you to sell it for… HMMMMM I wonder how they know the value… some desk top BPO?
Who is going to negotiate the junior lien holders!?!?!
Also, if the short sale is not successful… they sign to do a deed of lieu..
Awaiting Your Response,
Jeff Coga
January 9th, 2010 at 4:27 pm
Spot on Jeff. The devil is very much in the details of program implementation, incentives (to whom) and of course all the unintended consequences that will occur. It would be a better situation to get “our” government to stop meddling and let the market sort itself out.
Its always interesting to see the wide range of opinions and responses.
On a slightly different note — Freedom is never Free — We are not free because of our government – we are free because of our Troops — Send them your Prayers and Support Today.
God Bless America
January 9th, 2010 at 7:28 pm
Maybe this plan is not the best right now but if we work with the president on any problem instead of always fighting against him before he even tries something new. I am just sick of everyone being negative before anyone even tries something out. Some changes will need to be made but to make statements like a Muslum and terrorist is just ignorant to me. No I am not a republician I am a Christian and I am in this business to help others. I have had my house foreclosed and I know the emotions these real people go through. Anything that is new and is made to help homeowners is worth trying to make it work for everyone including the investors. My problem is I know most all republicians put themselves first before anyone else!!! I live by do unto others as you would have them do unto you. That is my response.
January 9th, 2010 at 7:30 pm
We are so excited because we’ve been pushing our Grant Classes http://www.GrantsInThreeDays.com for 10yrs! Funding Investors from around the U.S.A..Let’s take advantage of this program by helping those who cant afford to live in their properties=-)
January 9th, 2010 at 8:15 pm
Sam,
Don’t get me wrong… I’m not saying NOT to help out these homeowners… I am saying THIS program won’t do anything… It is a “feel good” propaganda for people who don’t read it and just say YAYYYY it’s going to be fixed. The problem isn’t the TOP (president) it is in the middle (house/senate)… but that’s a whole another debate… I too have personally short sold my own residence so I know the pain… that is why I am in this business to help homeowners BUT to say you can take from a competent person who did the right thing and to save the incompetent people (sorry for using such a harsh word but this is literally what’s going on in our country)… I have a problem… You have a huge issue with moral hazards… Anyways, this country is made from the sprite of entrepreneurs and if anything they should help small business than to give blind hope to these poor homeowners… my 2 cent… why don’t we ever see this type of debate on main stream news…
Jeff Coga
January 9th, 2010 at 10:42 pm
Read the rules and check out Jeff Watson’ blog for comments. The new law will not be helpful to many in foreclosure and adds mayhem to real estate investors.
January 10th, 2010 at 9:55 am
Another gift from the liberal politicians.
This gift is an empty box wrapped in lots of red tape. It will be another failure just like all the other liberal dominated legislation since the last two years of Bush’s term.
Obama = old Kenyan word for “Failure”
January 10th, 2010 at 11:37 am
The question is what happens to those that have a second, third and or fourth mortgage. Does the same $3000 go or will the first only allow $1000 for each after the second mortgage.
Additionally the statement “Borrowers who complete a short sale under the program
must be “fully released” from future liability for the debt,
according to the guidelines.” does this go for Credit Unions because they have been doing this with agreements to pay the ballance off in a personal note instead.
January 10th, 2010 at 3:28 pm
Not to rain on your parade, but this is old news. You’re just now finding out about this to make a “BIG” announcement? We knew about this stuff last March and have watched the program fail at just about every turn. Just because there are all these guidelines doesn’t mean lenders will follow them. If anything, we’ve seen the process take double or tripple what it used to. B of A has a new 3-phase program that takes about 9 months to get completed. They call that “stream lining”?! It’s a big load of crap to make the American public feel like the gov. is doing something to help. Think about it; as a mortgage lender, would a couple thousand dollars be an incentive to encourage you lose tens of thousands? We do dozens of short-sales and have yet to find one single person who’s actually been helped. No doubt they’re out there, somewhere, but we don’t see them. It’s made our job double hard compared to a year ago.
January 11th, 2010 at 9:15 am
Everyone forgets that the people who are working in this country and their progeny for the next eight generations are going to pay for this largesse. Another thing that I see is banks foreclosing to amassa large cache of property they now own at as much as a 60% discount. They are using a few realtors in each state to sell these proeprties. The law changed suposedly to open up these listings to more real estate agents, but that is not happening. Thus, the banks are violating the law in an anti-competitive manner, and getting away with it. Worse still, the homeowner is losing out, and the bank is doubling its profit reselling these proeprties at retail.
For those of you who think Obama is the man, please finish the kool-aid, or jump off the bridge. his popularity is lower than any standing President in history. He knows nothing of diplomatic policy, can’t win the respect of th military, and is losing support in Congress.
If the banks had been told they would not be getting bailed out, the instittutional investors would have created a better plan to save the banking industry. Government does not solve private problems, it creates them. Every law that gets passed takes away freedoms we enjoy. Remember that. You don’t get something for nothing.
January 11th, 2010 at 11:42 am
This was announced as the HAMP plan back in November-ish. It’s going to be interesting to see how this plays out to investors who are involved with short sales, especially those who work around title seasoning.
January 12th, 2010 at 12:09 pm
Don’t hold your breath! Note that these are only guidelines not laws. This is a voluntary program and only for lenders who opt in to the HAFA program.
Also even though Freddie Mac gets to be in charge of overseeing this program- ( great- the company that lost billions of dollars in toxic mortgage securities and who’s shares only went above 2 bucks a couple of times in 2009) Freddie and Fannie backed loans, 90% of all mortgages now are GSEs, are not going to follow HAFA guidelines. They are going to make up their own guidelines. These guidelines are not good enough for Fannie and Freddie but good enough for private lenders. Hmmm, The US Treasury created more red tape and you will only be getting faster rejections because when a negotiator at the lender has mega files on her or his desk, she is going to take out her handy rejection stamp in order to keep her job. That way she or he does not violate the time frames put on them to process the files.
Have you actually read the 43 pages?
Read before you speak on this more BS and at the end of the day,
who is going to pay for all of this? Your kids and grandkids.
We are short sale agents and have a 98% closing rate. We don’t need any so called guidelines to know how to get our files accepted for short sales! It is all about the art of negotiating.
January 12th, 2010 at 1:04 pm
Politics and business don’t mix, and they certainly won’t add anything to the discussion on this forum. People see what they want to see.
January 12th, 2010 at 2:04 pm
The real estate agent who does not get involved with the political process doesn’t truly understand real estate.
Politics and business should not mix but the gov’t and huge corporations are the ones that mixed them together. Now we are stuck dealing with it.
March 15th, 2010 at 12:55 am
There is obviously alot more to know about this. I think you made some OK points in Features also. Keep working ,great write up!
May 2nd, 2010 at 4:54 pm
I have frequented your posts before. The more I learn, the more I keep coming back!