New guidelines for short sales

The U.S. Treasury Department announced new guidelines last 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 their loan or close to defaulting
• The loan must have been made before Jan. 1, 2009, and be for less than $729,750
• The borrowers’ total 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 loans. Loan-servicing companies will get $1,000 for each completed short sale. Second-lien holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first lien 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.

Sources: Associated Press and The Wall Street Journal

Thanks to Brian Taylor of New England Home Mortgage LLC for this article.

He can be reached at (860) 426-2447