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A New Short Sale Program to help Sellers Sell at a Loss?

March 9th, 2010 categories: For Buyers, For Sellers, Foreclosures, Lake Tahoe Real Estate, South Lake Tahoe, CA, Stateline, NV, short sales

New York Times

$1,500 in cash to help some Owners relocate…

We found this interesting, a new approach to the US foreclosure crisis. Rather than focusing on trying to keep defaulting owners in their homes, here's a new approach: paying some of them to leave.

This latest government program will allow owners to sell for less than they owe and will give them a little cash to speed them on their way.

The New York Times article states this is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

Yes, what this means is some government subsidy… of short sales.

Lets take the word out of the dictionary... and toss it forever!To take effect on April 5th, the program is set up to somewhat incentivize the various parties in a short sale: the homeowner, the lender, the investor that owns the loan, and the bank that owns the second mortgage on the property if there is one.

Under the new program, the servicing bank will get $1,000. Another $1,000 can go toward a second loan. For the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Our first thought in reading this is the "incentives" certainly aren't much, and we wonder just how persuasive an additional $1,000 is to an upside down lender facing significant loss. We of course understand that lenders have been slow to embrace the financial benefits of a short sale vs. a foreclosure, but increasingly these days banks are getting somewhat smarter (see short sale article citing the financial difference between the two here).

Full New York Times article here.

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This entry was posted on Tuesday, March 9th, 2010 at 9:47 am and is filed under For Buyers, For Sellers, Foreclosures, Lake Tahoe Real Estate, South Lake Tahoe, CA, Stateline, NV, short sales. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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