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Short sale homes

From lawbrain.com

A short sale, when used in the context of real-estate transactions, refers to a lender-approved sale by the homeowner of his/her home for less than the amount due on the mortgage. The lender may reserve the option to go after the homeowner for additional money owed. In addition the difference in the sale price and the loan amount is treated as income to the homeowner for which taxes are due.

If there is more than one mortgage on a home, the homeowner must get the approval of all the lenders. As a result the selling process may involve extended periods of negotiation between all parties involved and sometimes gets stalled after months. First-time homebuyers should  be cautious and patient when attempting to purchase a home in a short sale.

Reacting to the ongoing refinancing and foreclosure woes of homeowners, the Obama administration has provided guidance to servicers for short sale and deed-in-lieu of foreclosure (DIL) in its Supplemental Directive 09-09. These two alternatives to foreclosure (short sale and DIL) are outlined under the Adminstration's Home Affordable Foreclosure Alternatives Program (HAFA). Under the Adminstration's directive, however, the servicer accepts the short payoff in full satisfaction of the total amount due on the first mortgage and must forfeit the ability to pursue a deficiency judgment against the borrower.[1]  In an attempt to streamline the interaction between the many parties involved in a short-sale, the HAFA program offers incentives to mortgage servicers, investors and second-lien holders from the sale proceeds and requires lenders and servicers to use uniform documentation, pre-approved short-sale terms and accelerated turnaround times.[2]


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  1. https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf
  2. Kenneth Harney, Obama's standardized short-sale plan could help troubled homeowners, Los Angeles Times, Dec 13, 2009.

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