The Foreclosure Crisis can be Eased if the Short Sale Plan was Standardized and Quickened
The aim of the Obama government to ease the foreclosure crisis is to standardize and expedite the short sale plan. For troubled borrowers who fail to modify their house loans they can take the help of the government’s plan regarding short sale. It is scheduled to kick off within few months.
The plan was sketched by the Treasury in trying to streamline the much criticized process of requiring lenders to make use of documents uniformly used across the nation with time limits and monetary incentives.
Short sale is the best solution when the borrower has gone underwater with the value of the house being more than the due loan amount. It requires the participation of the lender who has to agree to accept the reduced amount. It is sometimes the last option available before foreclosure proceedings start. Borrowers with insufficient or no earnings cannot qualify for the modification plans.
The first step is for the borrower to contact the lender and get the necessary sanction. Apparently it sounds straightforward but in reality it becomes complicated. The bank has to be convinced that despite the losses a short sale would be less costly than a foreclosure. Handling banks is no easy task and this requires the help of real estate agents who know the ins and outs of the issue. They place before the bank current comparables on short sales, trends in the local market and the possible price that the house would fetch.
Over and above this a buyer has to be found who would be willing to pay the price the bank would accept and has the finance to finalize the deal. If the borrower is having a second mortgage or home equity credit line on the estate he or she would have to thrash it out with the lender as to how much would be taken from the proceeds of the sale.
The situation is like walking on a tight rope – the market is down and yet the bank has the clout to cut off short sales any moment. Even more confusing is that in short sales the banks, the servicers and the investors who had purchased the bonds guaranteed by the house – all have conflicting interests and this might lead to months of haggling; meanwhile the buyer may lose patience and vanish.
But the new plan aims to ease the situation. Lenders and servicers would have to use same type of documents with previously approved short sale clauses. Further there are incentives for the important players in the drama.
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The Foreclosure Crisis can be Eased if the Short Sale Plan was Standardized and Quickened
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