If you’re wondering whether or not you should get in on the short sale and loan modification action, you need look no further then to what the government is strongly suggesting. With the advent of the “Making Home Affordable” enactment, the government is clearly outlining ways that banks and homeowners can stay far away from the grips of foreclosure.
The Short Sale Incentive
Under the new short sale incentive, lenders can receive a $1,000 payment from the U.S. Treasury for allowing the owner to sell the house for less than the amount owed on the mortgage and for accepting the proceeds as full repayment.
Lenders can also receive $1,000 for accepting a deed-in-lieu transaction, in which the deed is simply transferred to the lender instead of going through a costly foreclosure.
Homeowners who agree to short sales or deed-in-lieu deals can receive up to $1,500 in closing costs. To help stop second mortgages from blocking the deal, the Treasury will pay second lien holders up to $1,000 to relinquish their claims in such transactions.
The Loan Mod Incentive
Under Making Home Affordable’s new second-lien program, borrowers whose first mortgages are modified will automatically have payments reduced on their second mortgages as well, provided the first and second-mortgage lender participates in the program.
Twelve mortgage servicers currently do. Among them are large banks including, Bank of America, Wells Fargo, Countrywide, Citibank, Chase and others.
Eligible homeowners looking to modify their first mortgage must be an owner-occupant of the home; have an unpaid principal balance that is no more than $729,750; have a loan that was originated on or before January 1, 2009; have a mortgage payment (including taxes, insurance, and home owners association dues) that is more than 31 percent of their gross monthly income; and have a mortgage payment that is not affordable, perhaps because of a significant change in income or expenses.
Under the new second mortgage program, in addition to lowering the payment, lenders can also opt to erase a borrower’s second mortgage in exchange for a lump-sum payment from the government.
Although banks haven’t been perfectly aligned with the government’s suggestions, they are becoming more so with the passing months. It’s now time to capitalize on these changes.
To Your Success,
Lee Arnold,
President of I’m the Solution
PREVIEW: Look for next week’s Millionaire Tip: 1st of a 3-Part series on The 9 Characteristics that Millionaires Share.