In response to rising frustration over months-long delays for short sales of homes, the Treasury Department will soon announce a plan to encourage such sales, USA Today reported Aug. 5. In a short sale, homeowners sell the home for less than they owe and the bank either forgives the remaining debt or allows the seller to pay it off. The department has not yet formally announced its plan, but the newspaper said it would provide standardized documentation to make the sale more efficient and give lenders and homeowners financial incentives to participate. Specifically, the plan would provide up to $1,000 to second-lien holders to relinquish their liens and up to $1,500 in moving expenses to sellers.
The plan is a response to growing reports of delays by banks that hold up -- and in many cases, break -- deals between buyers and sellers. According to Lawrence Yun, chief economist with the National Association of Realtors, the delay between when a deal is struck and the bank approves that deal is now six weeks to six months, which is more than double what it was 18 months ago. As a result, only about 23% of short-sale deals actually go through, a survey of real estate agents found. That's a missed opportunity for everyone involved -- including banks, who can save as much as 30% of the cost of foreclosure by allowing a short sale instead. It also hurts the housing market and the economy as a whole by pushing borrowers into foreclosure, keeping home prices depressed.
Nonetheless, the article said, lenders continue to delay action on short sales for weeks, lose paperwork and leave phone calls unanswered. An extreme case was that of former homeowner Jorge DeMattos of Florida, who said he had eight separate offers for his home before the bank approved it. DeMattos, 45, started trying to short-sell his home two years ago after he was laid off and lost nearly half his income. DeMattos said the first short-sale offer was rejected as too low, despite being above market value; and the final offer, which was accepted, was $24,000 lower than the first. He said buyers kept backing out of the deals because his bank, Chase, wouldn't give them a definite answer for months.
As Fontana loan modification lawyers, we're not surprised. We work regularly with homeowners who tried everything they could think of on their own to get the bank's attention before calling us. In many cases, homeowners who tried a short sale or a loan modification have stories similar to the ones in this article or worse -- incorrect denials, paperwork lost multiple times, endless transfers from department to department. Even though, as this article points out, short sales and many loan modifications are cheaper than foreclosure, lenders clearly don't seem to think so. Our Ontario loan modification attorneys have concluded that lenders simply don't want to modify loans or allow short sales -- but have an interest in continuing to allow borrowers to believe they will.
At Howard Law LLP, we help clients cut through this endless red tape and secure sustainable loan modifications whenever possible. We believe our status as San Bernardino County loan modification lawyers allows us to get banks' attention even when the borrower has failed, because banks understand that we can and will sue them if they have violated our clients' rights. In fact, one of the first things we do in each new case is review the client's history carefully for evidence of predatory lending, which we can use as leverage to get the client a better loan. Our goal is always to change the loan in ways that lower the client's monthly payment to a reachable and realistic amount.
If you believe a short sale or loan modification can help you avoid foreclosure, but you know you need help with your lender, you should call Howard Law right away. For a free, confidential consultation, you can reach us toll-free at 1-800-872-5925 or contact us through our Web site.