Are Short Sales the Answer to California's Housing Market Woes?

Recently, the U.S. Treasury Department released new guidelines regarding real estate Short Sales. Under the Making Home Affordable program, their new plan aims to assist struggling homeowners by offering accessible aid and financial compensation. Essentially, this will make the inevitable happen more quickly, as the Short Sale process will be quicker than the foreclosure process.

When Should the Short Sale Process Occur?

Ideally, the Short Sale process should begin within the first 60 days of mortgage delinquency. The first step is getting a lender to accept the sale of a home at a price below the actual amount owed so troubled home-owners can seek alternatives to foreclosure. As Short Sales are becoming more and more critical for distressed home-owners, the new reform will streamline the process, making it less difficult for companies to complete these transactions.

Mortgage lenders will have 10 days to accept or reject a home-owner’s request for a Short Sale of their home, and once the transaction is complete, home-owners could be completely released from debt. Financial incentives will be provided to home-owners selling their home through a Short Sale and to mortgage-servicing companies completing their Short Sale transactions. The government hopes that the dramatic decrease in foreclosures will result in less vacant and vandalized properties.

What Happens if You Owe a Second Mortgage on Your Home?

While all of this is good for first mortgage lenders, the program will be hard to accept for second lien holders. As part of the reform, second lien holders will be paid up to $3,000 of the Short Sale proceeds, only if an investor agrees to share their earnings. Worst case scenario is that second lien holders will refuse to release their lien, which could prevent the home-owners from pursuing a Short Sale solution.

As almost 22% of American home-owners are underwater on their mortgages, the government’s new legislation will encourage more Short Sales in order to reduce the number of new foreclosures and stabilize the nation’s depressed real estate market. The new Short Sale guidelines should encouraging both lenders and home-owners to work together to keep homes out of foreclosure proceedings.

Overall, The New Reforms Promise an Enhanced Short Sale Process.

The main goal of the program is to keep families in their homes and relieve debt of the home-owner’s first mortgage. We’ll just have to wait and see what this means for the California housing market.

Initially we’ll see a rise in Short Sales, but this could mean that the number of foreclosures in our area will be significantly reduced.

If anything, these new reforms will help many struggling families avoid the trauma of foreclosure and set the housing market on the path to recovery.

Are you interested in pursuing a Short Sale of your home? Sign up for my Short Sale Information and we’ll get the process started today.

Sincerely,

Mark Shandrow
Real Estate Broker
Shandrow Group
shandrowgroup.com