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Making Home Affordable Plan to Allow Short Sales as Well as Loan Modifications

May 25, 2009

The Obama Administration has announced an expansion of its foreclosure-prevention program that could help substantially more people, the Washington Post reported May 15. The Making Home Affordable plan announced earlier this year already gives lenders financial incentives to modify loans for some distressed homeowners and refinance the loans of others. The new guidelines would expand those plans to serve more homeowners, including many who are ineligible for the original plan because they owe far more than their homes are worth.

The original plan allowed cash payments to lenders for allowing loan modifications and refinancing. The new guidelines grant cash payments of $1,000 to a lender for allowing a short sale, in which the home is sold to a new buyer for less than the current homeowner owes on the loan. The same payment would be available if the short sale isn't possible but the bank accepts a deed in lieu of foreclosure, where the homeowner simply turns over the keys and walks away. In both cases, the federal government has also pledged to help remove second mortgages or other liens. Homeowners would be eligible for $1,500 in moving expenses.

Perhaps more importantly for homeowners here in Southern California, the plan also includes $10 billion intended to encourage loan modifications in areas where home prices are still falling. As things currently stand, if a lender allows a loan modification and the homeowner defaults again, the lender's losses could be even greater than they would have been if it had foreclosed the first time. The administration wants to insure those lenders against that risk, encouraging them to modify loans.

As Oceanside mortgage loan modification lawyers, we are pleased to see that the administration is thinking of our region. Like other areas that saw extremely high housing prices, we have more than our share of homeowners who are now underwater by well over 5%, the cutoff for federal refinancing help. Under the "insurance" plan, they have a better chance of winning a reasonable loan modification that lowers their monthly payments for good. If that doesn't work out, they have the short-sale or deed transfer options. Those may sound grim, but they keep everyone out of foreclosure, which lessens the damage to buyers' credit and may even end their mortgage debt.

The Anaheim law firm of Howard Law LLP represents homeowners who need help getting a loan modification. Many times, our clients come to us only after they have spent weeks trying unsuccessfully to connect with a loss mitigation specialist at their lenders. Our Fontana loan modification lawyers can cut through that red tape with persistence, knowledge about how the process works, and -- if appropriate -- any evidence we find of predatory lending. And unlike a fly-by-night loan modification company, we are lawyers, which means we have legal obligations to our clients and face professional consequences if we don't meet those obligations.

If you are facing a foreclosure and you're ready to explore your legal options, Howard Law can help. To set up a free, confidential consultation with our San Bernardino loan modification attorneys, please contact us online or call toll-free at 1-800-872-5925 as soon as possible.