real estate

How new short sale rules can help you

"Minimum acceptable net proceeds" is a term that represents the smallest amount of money a loan's owner will accept. This sum is affected by:

  • How much the borrower owes on the first mortgage.
  • How much is owed on the second mortgage.
  • The unpaid interest racked up.
  • Expenses such as closing costs.
  • The real estate agent's commission.

The lender might or might not tell the borrower the bottom-line amount.

"HAFA requires (the lender) to establish the net. You don't have to speak it," says Jim Satterwhite, chief operating officer for the parent company of National Quick Sale, a Jacksonville, Fla.-based technology provider for mortgage servicers that deal with delinquent loans.

Decision required within 10 days

If a buyer comes through before the four-month deadline, the seller and the buyer send the lender a document called a "request for approval of short sale," or RASS.

The lender is required to give a yes-or-no response within 10 days of receiving the RASS and a thick pile of accompanying paperwork. The answer must be "yes" if the deal meets the minimum acceptable net proceeds.

After the buyer closes, the seller is entitled to a "relocation incentive" of $3,000.

"That doesn't pay for much of a move, obviously, but depending upon the price point, having that borrower assistance with relocation expense is a very creative and it's a very useful tool," says Richard Powers, senior vice president of real estate services for Altisource Portfolio Solutions, a company in Kennesaw, Ga., that manages foreclosures.

For many borrowers involved in HAFA short sales, the process won't be so straightforward. A lot of troubled homeowners have home equity loans or home equity lines of credit. Lenders attached to home equity loans and HELOCs have the power to block a short sale if they get stiffed. Under HAFA, equity lenders get some proceeds of the sale, but they don't get much.

Mortgage insurers have the ability to stop short sales, too. Some mortgage insurers won't approve a short sale unless the borrower gives them a few thousand dollars. They're not allowed to hit up borrowers for money in a HAFA short sale. As a result, they're sometimes reluctant to approve sales under the HAFA rules. They have the option of saying no.

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