Important of Short Sales New Rules in Foreclosure Cases. The Ministry of Finance has adopted a new program effective April 5, 2010, To facilitate short sales for homeowners. Prior to the new rules. Problems with second mortgagees lost buyers due to delays or additional fees, and frequent issues. The new regulations aim to address the perceived shortcomings by changing the rules for participating lenders. Short Sales New Rules in Foreclosure Cases
To be eligible for the new Home Affordable Foreclosure Alternatives Program (HAFA), borrowers must first seek approval for a loan modification under the Home Affordable Modification Program (HAMP).
Borrowers who cannot obtain a loan amendment, are unwilling to accept the terms of the proposed amendment, or cannot remain in the program after approval may be eligible for short selling under the new guidelines. Short Sales New Rules in Foreclosure Cases
Assuming a borrower qualifies, the next step is to establish an acceptable sale price. Prior to this program, most lenders would not set a fixed sale price, but would instead wait until an actual offer was received to determine if the price was acceptable.
Under this new program, a borrower can submit an approved appraisal or broker price advice. Once this value is accepted by the bank, the property can be listed. Marketed, and sold for at or above that price without considering the sale a short sale.
Traditional short sales new rules:
Traditional short sales have often been difficult to market and sell, as many buyers were unwilling to wait to see if their offer was accepted. Others often gave up because of the approval delays. By resolving this issue, sales above the approved price can be closed as normal.
One of the biggest complaints about the process is the failure of lenders to respond to contract offers in a timely manner.
Prior to this program, most lenders would not set a fixed sale price, but would instead wait until an actual offer was received to determine if the price was acceptable.
Most offers require lender approval within sixty days of submission. In many cases, lenders would not respond and buyers would cancel the contract.
The new rules.
The new rules require lenders to review and decide on properly submitted applications within ten days of the filing date.
I do worry about this requirement just because of past experience with lenders.
If lenders had trouble approving short sales new rules within 60 days, how can they make fair decisions in 10 days unless they devote much more resources to this matter? I am concerned that as it is easier to decline the application, many more short sales new rules will be denied. Only time will tell if this is a correct statement.
Another important element of this program is debt cancellation. More than 30% of all homes in South Florida are underwater. While most lenders forgive debt after short sales. The lenders would not commit to it in writing.
leaving many homeowners wondering whether or not they would face collection at a later date.
Homeowners should remember to properly address debt forgiveness on their tax returns to avoid an income tax claim on the waived balance.
To encourage defaulting borrowers to consider a short sales new rules rather than foreclosure.
The lenders will now allow the borrower to receive up to $1,500.00 from the proceeds of the sale to help them move and relocate costs. Previously, on most short sales. Assuming a borrower qualifies, the next step is to establish an acceptable sale price. Prior to this program, most lenders would not set a fixed sale price, but would instead wait until an actual offer was received to determine if the price was acceptable.