After a long, difficult year for banks, struggling to handle the slew of homeowners trying to gain permission to sell their home for less than they owe, the U.S. Treasury Department announced new guidelines this week designed to make short sales go more smoothly.
To qualify under these new guidelines:
- The property must be the home owner’s principal residence.
- The home owner must be delinquent on the mortgage or close to defaulting.
- The loan must have been made before Jan. 1, 2009, and be for less than $729,750.
- The borrowers’ total monthly mortgage payment must exceed 31 percent of their before-tax income.
Under the plan, borrowers will receive $1,500 from the government for selling homes for less than the amount of their mortgages. Mortgage-servicing companies will get $1,000 for each completed short sale. Second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first mortgage can collect up to $1,000 from the government for allowing the payments.
Borrowers who complete a short sale under the program must be "fully released" from future liability for the debt, according to the guidelines.
For individuals seeking to purchase a home, this is great news; the home purchase could now occur more easily as a result of these new guidelines. In addition, this is a promising outlook for distressed homeowners looking to sell in 2010; a winning solution for all.
