There is an innovative new government-backed program on deck that is designed to standardize the short-selling process for homes. “Selling short” is when a home is sold for less than the amount owed. The value to the seller is that the banks forgive the debt in full and the get to avoid a foreclosure on their credit history. The value to the buyer is they are presumably getting a bargain. The value to the bank is that they presumably lose less with a short sale than with a foreclosure.
But short sales are notoriously hard to pull off because there are always hidden snags. The federal government is looking into ways to make the process easier and more enticing for all parties involved. We get these quotes from a recent NY Times article on the subject:
Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.
“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser. …
Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”