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New federal regulations make short sales easier

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By : vithya coumar    99 or more times read
New guidelines for short sales were finalized by Obama’s advisers on November 31, 2009. It is the hope of the administration that the use of short sales will reduce the amount of losses on failing properties.

These new regulations would allow the buyer to get out from underneath their loan by selling their home to a new potential buyer for an amount that is less than what the balance due on the home is. This type of transaction would still require approval of the lender.

The amended program would also allow the buyer to transfer ownership of the property to another more capable buyer by using a “deed in lieu of foreclosure”. Short sales are considered to be more cost effective than allowing the home to enter into a foreclosed state. Foreclosed homes wind up losing value due to the fact that they become vacant properties, and in a lot of cases receive extensive damage from vandalism.

Included in this amended program is a provision that allows the buyer to receive $1,500 if they sell their home for an amount that is less than what is owed for the property. Additionally the plan pays $1,000 to the mortgage service company that completes these types of transactions.

This program has become available to buyers who have applied for the federal mortgage modification program, but were turned down because of qualification issues. Others may qualify for this federal assistance program if they are in arrears on an already modified loan, or seek a deed in lieu of foreclosure transaction.

It is the Obama’s administrations hope that the reworked $75 billion foreclosure prevention plan will slow the already staggering foreclosure totals to a manageable amount. In addition to making short sales less painful for both the buyer and the seller, the plan includes financial incentives to banks and mortgage companies to rework defunct loans.

Protections have been allotted for the borrower within the revised program. Once the short sale has been completed, the program mandates that the borrower be removed from any future financial liabilities.
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