"I think it's great that the lenders in this program have to offer a short sale before going to foreclosure," Matykiewicz says.
When a purchase offer is made, borrowers must submit the sales contract to the lender within three days, along with the buyers' mortgage preapproval and the status of negotiations with other lien holders on the seller's property.
Finally, lenders must approve or deny the contract within 10 days.
HAFA rules also state that lenders must release borrowers from the obligation to repay the difference between the sales price and the loan amount. No deficiency judgments are allowed for a first or second loan.
Other incentivesIn the past, short sales were especially difficult for homeowners with more than one loan on their home, since the home sale typically repaid only the first mortgage. HAFA's financial incentives include a payment of up to $3,000 for second mortgage holders.
"Second trust lien holders are often owed five or 10 times that $3,000 payment," says Liniger. "But if the property goes to foreclosure, the second trust holder is not likely to get any money at all. This at least guarantees they get something."
Other HAFA financial incentives include $1,000 to loan servicers to cover administrative fees, up to $1,000 for mortgage investors who agree to share short sale proceeds with second lien holders and $1,500 to the homeowners for relocation.
"The moving expense allocation acts as an incentive for them to stay in the property until the short sale goes through," says Liniger. "Owner-occupied properties are usually in better condition than vacant homes."
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