I wrote a couple weeks ago about Congress’ latest change to the Home Affordable Program…they want to add incentives for lenders to offer short sales and/or deeds in lieu so they won’t actually have to foreclose.
When I wrote that, there was no news out on the program, but now the Treasury Department has released the latest program update and here’s what I’ve learned.
Who Will Be Helped?
Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives
When a borrower meets the eligibility requirements for a Home Affordable Modification (HAMP) but does not qualify for a modification or cannot maintain payments during the trial period or modification, the servicer may consider a short sale, and if that is unsuccessful, a deed-in-lieu (DIL).
That’s from the official Treasury Department guidance…
What’s it mean?
It means that only people that qualify for the Homeowner Affordability Program in the first place will qualify. Which means if you’re like me and have missed payments on an investment property, it won’t help you.
If you would like a refresher of the Home Affordability Program requirements, see the links below:
Home Affordability Modification Program
Home Affordability Refinance Program
What Will the Program Actually Do?
The MHA Foreclosure Alternatives Program simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation. To compliment a standardized approach, Treasury provides incentives to borrowers, servicers and investors to pursue short sales and DILs.
If you qualify and your lenders decides to participate, here’s the deal:
- Servicers may receive incentive compensation of up to $1,000 for successful completion of a short sale or DIL.
- Borrowers may receive incentive compensation of up to $1,500 to assist with relocation expenses.
- Treasury will also share the cost of paying junior lien holders to release their claims, matching $1 for every $2 paid by the investors, up to a total contribution of $1,000 by Treasury.
Under the program, servicers will allow borrowers at least 90 days to market and sell the property, with possibly more time based on local market conditions. The property must be listed with a licensed realtor experienced in selling properties in the neighborhood. Marketing of the property may run concurrently with the foreclosure process, however no foreclosure sale can take place during the marketing period specified in the Short Sale Agreement as long as the borrower is acting in good faith to sell the property. There will be a maximum marketing period of 1 year for the property, provided any longer period not otherwise delay foreclosure sale, to ensure diligence by servicers and borrowers in moving as quickly as possible to complete the short sale and deed-in-lieu process.
What about a Deed in Lieu?
Deed-in-Lieu: At the servicer’s option, the Short Sale Agreement may include a condition that the borrower agrees to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time specified in the Agreement or any extension thereof. In this case the borrower would have 30 days to vacate the property and would be entitled to $1,500 to assist with relocation expenses, in addition to any other funds the servicer may provide to the borrower.
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