Those who sell for less than they owe could get moneyThe government launched a new effort Monday to speed up the time-consuming, often-frustrating process of selling your home if you owe more than it’s worth.
By: Alan Zibel, West Central Tribune of Willmar
WASHINGTON — The government launched a new effort Monday to speed up the time-consuming, often-frustrating process of selling your home if you owe more than it’s worth.
The Obama administration will give $3,000 for moving expenses to homeowners who complete such a sale — known as a short sale — or agree to turn over the deed of the property to the lender. It’s designed for homeowners who are in financial trouble but don’t qualify for the administration’s $75 billion mortgage modification program.
Owners will still lose their homes, but a short sale or deed in lieu of foreclosure doesn’t hurt a borrower’s credit score for as much time as a foreclosure.
For lenders, a home usually fetches more money in a short sale than a foreclosure. And the bank avoids expensive legal bills, cleanup fees and maintenance costs that follow a foreclosure.
“It’s very traumatic and embarrassing and frustrating to go through a foreclosure,” said Laurie Maggiano, policy director of the Treasury Department’s homeownership preservation office. With a short sale, she said, “your financial issues are your own problem and not neighborhood conversation.”
Falling home prices and lost jobs have forced many sellers into this position. For example, in Orange County, Calif., short sales made up about 26 percent of the market in March, compared with 17 percent a year earlier, according to data complied by Altera Real Estate, a local brokerage. In the Minneapolis-St. Paul metro area, about 12 percent of all deals since October were short sales, up from about 8 percent a year earlier, according to the Minneapolis Area Association of Realtors.
The expanded incentives will help accelerate short sales, said Mark Zandi, chief economist at Moody’s Analytics.
He expects 350,000 homeowners nationwide to use the program through the end of 2012, more than double his earlier forecast.
A short sale appears to be the only way out for Brandee Chambers, 36, of Las Vegas. She got into trouble during the housing boom by taking out a risky loan against her home and using the money to buy two investment properties in Phoenix.
She later lost those two properties to foreclosure, and now she is trying to sell the home she lives in for $209,000, but the mortgage balance is $350,000.
Chambers, who owns two hair salons, says she would rather stay in her home, where she lives with her 14-year old son. But she had no luck getting help with her loan. She said she’s resigned to scaling back her lifestyle and renting out an apartment.
“I’ve had to accept a lot in the last year,” she says.
The West Central Tribune and the Echo Press are owned by Forum Communications Company.