Treasury Releases Guidance on Short Sales

November 30, 2009 by christine 

Today, the US Treasury announced new guidelines to simplify the procedure for completing short sales, an increasingly common term used when lenders agree to allow the borrower to sell the house for less than is owed on the property.
These guidelines are intended to address the issues that have prevented short sales, such as financial incentives or deed in lieu transactions, and setting time limits within which the bank must respond to a short sale offer. These incentives include a $1,000 payment to servicers, and a maximum of $1,000 to go to investors who sign off on payments to subordinate lien holders.
Borrowers would receive $1,500 in relocation expenses. Mortgage servicers have ten days to approve or deny a request for a short sale. When the sale is completed, the lender must fully release the borrower from the debt.
It also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.
In one of the most contentious issues that were seen as holding up negotiations between lenders, the Treasury’s guidance caps the total proceeds to subordinate lien holders (second and third mortgages or other liens after the first loan) at $3,000.

Today, the US Treasury announced new guidelines to simplify the procedure for completing short sales, an increasingly common term used when lenders agree to allow the borrower to sell the house for less than is owed on the property.

These guidelines are intended to address the issues that have prevented short sales, such as financial incentives or deed in lieu transactions, and setting time limits within which the bank must respond to a short sale offer. These incentives include a $1,000 payment to servicers, and a maximum of $1,000 to go to investors who sign off on payments to subordinate lien holders.

Borrowers would receive $1,500 in relocation expenses. Mortgage servicers have ten days to approve or deny a request for a short sale. When the sale is completed, the lender must fully release the borrower from the debt.

It also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.

In one of the most contentious issues that were seen as holding up negotiations between lenders, the Treasury’s guidance caps the total proceeds to subordinate lien holders (second and third mortgages or other liens after the first loan) at $3,000.

At this point, I think these are guidelines and not requirements. Stay tuned!

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