Further Clarification of New Fed Short Sale Rule

Title Company owner gets many calls about Fed short sale and deed-in-lieu of foreclosure rules – hopes to clarify.

Palm Coast, FL – March 5, 2010 – I’ve received several phone calls about a new Government program that goes into effect April 5, 2010. The following are the highlights of this new Government program. The entire document is 43 pages long. Go to Home Affordable Modification Program (HAMP) to read and/or print it.
Effective April 5th 2010 through December 31, 2012 a new program will go into effect under the Treasury Department Directive 90-01 called the Home Affordable Modification Program (HAMP) as with all government programs there are restrictions/guidelines and requirements that need to be met in order to participate in this program. The program is designed to offer foreclosure alternatives such as loan modifications, short sales and possible deed- in- lieu
Requirements for first lien holder to participate:
The loan cannot be owned or guaranteed by Fannie Mae or Freddie Mac (non GSE Mortgage)
Lenders that owe TARP bailout funds must comply with this new ruling
  • The property must be the borrowers principal residence and must reside in the property
  • The first lien holder mortgage is delinquent or default is reasonable foreseeable
  • The current principal balance is equal to or less then $729,750
  • The owners total monthly mortgage payment exceeds 31% of the borrower’s gross income
  • Submission of the required lenders documents to include financial statements, etc.
The sale must represent an arms length transaction and purchaser/buyer may not sell the property within 90 days of closing
If the short sale conditions meet the first lien holders requirements and the property is listed and sold the first lien holder must waive all rights to seek a deficiency judgment and may not require the borrower to sign a promissory note for the deficiency.
The first lien holder or investor will authorize the settlement agent to allow up to $3,000 of the gross sale proceeds to the second lien holder. This will not release the owner from the second lien holder to pursue legal action such as deficiency judgment
Homeowner is responsible for all property maintenance and expenses during the listing period including utilities, assessments, association dues and costs for interior and exterior up keep required to show the property to its best advantage.
Additionally if and when the property does sell the owner will be entitled to a relocation incentive of $1,500 which will be deducted from the gross sale proceeds at closing.
In summary, not all lenders can or will participate in this program based on the guidelines set forth by the Treasury Department. Additionally not all owners will be eligible based on the guidelines set forth for the owner. One lender Wachovia has started this process in January on selected loans in their portfolio.
Tom Villano is the owner of Title Chain, a Palm Coast title company
2 replies
  1. Gator
    Gator says:

    At what Price?

    So what forces the bank to accept a certain offer. I mean, assuming they are benefiting from TARP funds and have to comply with the program, couldn’t they just not agree to a short sale price to keep it from selling?

  2. Lorraine
    Lorraine says:

    Convenient store?

    What kind of convenient store are they building on US 1 and Matanzas? And when will it be completed?

    Will it be another gas station?


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