Under the newly proposed additional provisions of the Home Affordable Modification Program (HAMP), additional resources will be provided to struggling homeowners, which may help avoid foreclosure or a bankruptcy filing.  The new provisions focus on temporary mortgage assistance to certain unemployed homeowners, encourage servicers to write-down mortgage debt as part of a HAMP modification, allow more borrowers to qualify for modification through HAMP, and help borrowers move to more affordable housing when modification is not possible. The changes will be implemented in the coming months. 

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As mortgage payments are becoming more and more difficult for borrowers to meet, alternatives to foreclosure are more pervasive.  As a foreclosure has more negative impact on credit scores, short sales have become an alternative in the real estate market.  A short sale is understood as when a lender accepts a lesser amount of money than what is currently owed by the borrower when the home is sold.  Hence, the home is sold at a price short of what is actually owed.  A short sale has its benefits in the real estate market because it can help a seller who is in financial trouble avoid foreclosure and possibly bankruptcy, the buyer purchases the home at a price more inline with the current market, and it removes a non-performing loan from the books of the financial institution.

When deciding whether to go through a short sale process, borrowers must carefully consider their current financial situation.  The analysis should consider if the mortgage payments can no longer be met, if the borrower has encountered a financial hardship such as extraordinary medical expenses or job loss, and if alternative housing can be secured.

The first step to a short sale is the seller decides to sell the home and lists it with an agent.  The price set by the agent and seller should be as close to the current market price as possible.  If not, the lender is unlikely to approve the short sale.  Then the property should be listed and within the sales contract a provision should state that the sale is subject to the lender's short sale approval.  The next step involves the seller completing a short sale package that can be provided by a short sale attorney.  This will include an extensive financial disclosure including tax returns, plus a hardship letter explaining the nature of and need for the short sale.  This short sale package can be quite detailed and must be completed accurately.  The package should be coordinated with a real estate agent and a short sale attorney. 

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