New Government Short Sale Program: Home Affordable Foreclosure Alternatives

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If you’re facing foreclosure, getting behind on your payments, or need to move but are “underwater” with your mortgage, help may be on the way. The new program is called: Home Affordable Foreclosure Alternatives

After the government’s abysmal failure to modify loan mortgages, they are finally giving some help to the win-win situation: a short sale

What is a Short Sale

A “short sale” is when the homeowner sells their house on the open market, but the bank agrees to a sale that is less than (“short” of) the mortgage balance owed.

The government’s new program will in some cases even help the homeowner transition to new housing with a $1,500 cash allowance. Why? Because they want to stem the tide of foreclosures, and a short sale is a decent alternative. Obviously keeping people in their home would be best, but it’s just not possible for millions of homeowners right now. The program will also give $1,000 to banks who participate in the program.

Short Sales Take Time

As someone who successfully went through a short sale, I will say this: it’s not an easy process. This new law should speed up the process a bit, but it still can take a very long time. I was lucky to work with a very experienced short sale real estate agent, and I would highly recommend you do the same if you’re thinking of going this route.

I’ve written quite a bit about short sales including:

Short Sale Better in the Long Run

My take on a short sale is to think about it from a future lender’s point of view. Rather than just stopping all communication and “walking away”, you work with the bank to get an agreeable amount for your house, and you at least make the effort. It will hurt your credit score, but it won’t destroy it, and from a Banker’s point of view, it looks much better than a foreclosure.

It’s been about 1 1/2 years since I completed my short sale, and my credit score has returned to the 660 range.

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  • Kevin Craig

    Hi Blogger,

    I’d like to ask you one question regarding your site, but I couldn’t find your contact details so I am writing in the comment section. Please provide me your email address so that I can send you an email with my question.

    Thanks and Regards
    Kevin

  • yan

    Hi,
    I’ve been reading your articles about foreclosure and short sale. I’m in the situation about doing the short sale, my house price is droping below 50% of what I owe the lender. You mentioned that term “short” is because the bank agree to a sale less than what mortgage balance owed, my question is: if the bank agree to the market price right now, and I need a house as well, why can I go with the short sale and buy back the house with the new market price? Isn’t that a real win-win situation? To this day, I never late nor missed any monthly payment, but so far I only pay the interest only, without principal. Since the mortgage interest all time low, now I can afford to pay the interest and principal even with my dropping income, but paying more than 200% what its worth, it doesn’t make sense to me and to all people I’ve been asked their opinion. Everyone I asked, even a lender employee, told me to let go the house. But I need a house doesn’t matter which one. And if I do the short sale, I can’t buy another one soon.
    Thank you for your time and help.

  • Ann

    “Short Sale” !!! LOL!

    This is only the banks trying to pull the wool over consumers eyes!
    It is a joke-only it’s NOT funny.
    You give your house away-without a fight- the bank has less work and expense-they get $ You DON’T , the broker gets $$, you don’t, the IRS may even get $-from guess who–YOU! You hve peopl and realtors tromping through the home that is yours and they can buy it– but YOU CAN’t! Such a deal!!! You end up without a home,an address,a phone (to use to find work if you are unemployed), either you are increasing the ranks of the Homeless, or you have now become a burder to WHOMEVER you go to live with!
    What a great new offer ” they” have come up with!! ” NOT” !