Federal foreclosure-prevention tactics have recently been expanded to encourage delinquent borrowers to avoid foreclosure by streamlining the short sale process. Cash incentives are also being offered to the homeowners, as well as to the lenders and the buyers.
Perhaps the best feature of the new legislation requires the lenders to advise the sellers what their minimum acceptable price is before listing the home for sale. Then if the sellers secure an offer for the agreed price, the lender must accept it within 10 days.
This speeds up the short sale process tremendously, since the lender is also required to consult with local real estate agents in order to determine a fair price. Of course, “fair” is a relative term here, because in a short sale, the bank is agreeing to sell the property for less than the total amount due on the mortgage.
However, it is definitely in the lender’s best interest to expedite a short sale instead of allowing the home to foreclose, because on average, the bank loses 50% on a foreclosure, but only 30% on a short sale.
These new standardized procedures, called the Home Affordable Foreclosure Alternatives Program (HAFA), is a new option for homeowners who have been unsuccessful under existing programs. If you’re facing default, I strongly urge you to contact a real estate agent today to discuss the alternatives.