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Financial Incentives and Uniform Process for Short Sales brought in by Obama Administration In a latest development, The Obama Administration has added new incentives and uniform procedures, valid through 2012, for short sales under its recently announced FAP (Foreclosure Alternatives Program) within its Making Home Affordable plan.. According to this incentivization and process, lenders are presented with the option of consider ing short sales or deeds-in-lieu of foreclosure for distressed homeowners unable to qualify for a permanent loan modification under the Making Home Affordable Loan Modification Program. Homeowners qualify under the FAP if: - they meet minimum eligibility requirements for the Home Affordable Modification program - they do not qualify for loan modification or fail in the three-month trial A $1,000 incentive has been announced for loan servicers on successful completion of a short sale or deed-in-lieu of foreclosure, while the homeowners get $1,500 to take care of relocation expenses. An additional $1,000 have been announced towards the cost of paying junior lien holders to release their liens.The program documentation includes a Short Sale Agreement (SSA) and an Offer Acceptance Letter.Real estate commissions and costs that may be deducted from the sales price are to be specified in the SSA. There are no charges for the homeowner's participation in the FAP. The Obama Administration wants to see an increased use of the short sale option as against foreclosure. Lenders are required to establish both property value and minimum acceptable net return, in accordance with investor requirements. Appraisal or one or more broker price opinions (BPOs), issued no more than 120 days before the date of the short sale agreement can be used for the valuation. Homeowners must be given 90 days (no foreclosure is possible in these 90 days) to as much as an year, to try and sell the property. Property listing has to be with a licensed, locally experienced real estate professional. Lower commission cannot be negotiated after an offer has been received.Servicers have the option to require the homeowner to agree to deed the property to them in exchange for a release from the debt if the property does not sell within the time allowed in the SSA plus any extensions. |
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