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New Short Sales Incentive To Help Lenders And Homeowners Avoid Costly Foreclosure

Obama Administration has recently announced a fresh incentive program for banks under the Making Home Affordable plan to help troubled homeowners to sell houses that are worth less than their mortgages. The move come as a big relief for those who urgently required to get the short sale approved.

Short sales is estimated to accounted for 15% - 20% of the total home sales this year. According to a study short sales resulted in loan losses of only 19%, compared with an average loss of 40% in foreclosure. Short sales are often preferable to a foreclosure but the process needs lender approval and may takes 3-4 months to complete.

Through the initiative of Making Home Affordable program, banks would get $1000 incentive in dealing with short sale or deed in lieu of foreclosure properties, said Timothy Geithner, Treasury Secretary. For homeowners who are going to lose their home, this program will fetch even bigger amount of $1500 as expenses for relocation.

Geithner commented that this program is to assist homeowners in obtaining possible modifications in those areas where there is a decline in the real estate prices. If there is no possibility of modifications, then there are efforts on the part of government to promote private sale or transfer of property so that homeowners can save as well secure their financial status in future.

The above efforts are made by government in order to stabilize the economy through reviving real estate market and specifically foreclosures industry. A short sale deals with selling of homes at lesser price than market value of mortgage by banks in order to get away with the high cost associated with foreclosure process which is almost $50,000.

While the deed in lieu of foreclosure deals with signing of property owner on the deed and consent to give up the house. In this case, banks or the lending institutions can save $50,000 for not going for foreclosure process.

It doesn’t matter which option are you going for, but it is highly advisable to have an attorney so that your all rights are protected. An attorney can help you out in improving your credit score by negotiating credit report agreement.