By Inman News, Tuesday, December 1, 2009.

The Obama administration has released long-awaited guidelines for a program that will provide incentives for loan servicers and homeowners to engage in short sales when borrowers who are eligible for the Home Affordable Modification Program (HAMP) don’t qualify for a loan mod.

The guidelines prohibit loan servicers from demanding that real estate brokerages reduce the commission stated in the listing agreement as a condition of approving a short sale — a practice that’s been a sore point with many real estate agents. 

Troubled borrowers interested in exploring a short sale will also be allowed to receive preapproved short-sale terms prior to the property listing, and servicers must agree to fully release them from future liability if the sale goes through.

The incentive program, which includes payments to second-lien holders who often stand in the way of short sales, was announced in May, but issuance of the guidelines was stalled over legal concerns.

Troubled borrowers who agree to a short sale or deed-in-lieu of foreclosure will receive up to $1,500 to assist with their relocation expenses. Loan servicers and investors who sign off on payments to subordinate lien holders will earn up to $1,000 for successfully completing a short sale or deed-in-lieu.

Subordinate lien holders are limited to recovering no more than $3,000 from sale proceeds, although those who object to the cap can engage in short sales outside the program.

Jeff Lischer, the National Association of Realtors’ managing director of regulatory policy, told the groups’ members last month at their annual conference in San Diego that the incentives should make a difference but won’t be a cure-all for foreclosures.

Jeremy Smiley
Realtor, Short Sale Specialist
London Properties