The U.S. Treasury Department revealed a series of policies this week designed to help troubled homeowners get enough from short sales to pay off their mortgage dues, including a $1,500 grant to help cover moving costs.
The new plan is aimed at homeowners whose debts are too high, or whose incomes are too low, to qualify for the Obama administration’s Making Home Affordable plan, which was unveiled last February and has since helped over 500,000 borrowers.
To qualify, the borrower must have the home as his or her principal residence, be delinquent on the mortgage, and have a debt-to-income ratio of over 31%. The loans must have been made before January 2009 and less than $729,750.
The program is expected to speed up the communication between lenders, agents, buyers and sellers, which accounts for most of the wait time in a short sale. With the volume of applications received by most lenders, short sales can take up to a year to complete.
Short sales are a popular alternative to loan modification as it limits the damage to one’s credit record, and lowers the costs of foreclosure for lenders. They also help keep up property values because short sale prices tend to be higher than those of foreclosures.
The National Association of Realtors reported that around 500,000 short sales were carried out this year, accounting for about 10% of the total nationwide. More distressed areas such as California, Florida and Las Vegas have much higher short sale ratios.
Mortgage companies have until April 5th, 2010 to put the program into effect. However, participation is voluntary for companies who hold second mortgages such as piggyback loans and home equity loans, making some experts doubt the program’s efficiency.
Contact Josh for help with your Short Sale
208-353-7131 or josh@homeswithjosh.com
