The government is stepping into the short-sale game — with federal tax liens and federally-insured mortgages on the table. Among several firms touting their short-sale services was one that applies the short-sale strategy to refinances.
The U.S. Department of Housing and Urban Development addressed loss-mitigation options last month in Mortgagee Letter 2008-43. Among available options for delinquent FHA borrowers with negative equity is a pre-foreclosure sale, which enables the borrower to sell the home at market value — even if the sales price is lower than the loan balance. Reverse mortgage borrowers do not qualify.
Eligible borrowers must occupy the subject property, be at least 30 days delinquent “as a result of an adverse and unavoidable financial situation” and be in a position where they cannot afford their payment. The lender must exhaust all other options first and document a comprehensive review of the borrower’s unworkable financial standing.
The borrower actively markets the property for three months during a forebearance period, earns $1,000 for a successful sale and earns another $1,000 for avoiding foreclosure and complying with program requirements, HUD said.
The Internal Revenue Service recently announced that, under certain circumstances, taxpayers with federal tax liens may request that the claim be discharged if the home is being sold for less than the mortgage balance. The discharge approval process normally takes around 30 days — though the IRS noted the process can be expedited given the current economic downturn.
“Taxpayers or their representatives may apply for a certificate of discharge of a tax lien if they are giving up ownership of the property, such as selling the property, at an amount less than the mortgage lien if the mortgage lien is senior to the tax lien,” the IRS stated. “The IRS may also issue a certificate of discharge in other circumstances if the taxpayer has sufficient equity in other assets, can substitute other assets, or is able to pay the IRS its equity in the property.”
The Short Sale Negotiator is touting that it helps delinquent borrowers negotiate better short-sale terms. Services are provided in conjunction with Tucker & Associates, PLLC Attorneys at Law.
National Short Sale Center — which claims to be the largest U.S. short-sale company — reported last month that 2008 short sales reached a record in Arizona, California, Florida and Nevada. The Scottsdale, Ariz.-based firm said it helps delinquent borrowers sell their properties by acting as a liaison between mortgage servicers and borrowers to arrange a short sale.
Another Scottsdale-based firm, Loan Resolution Corp., announced today that it has launched a campaign to reach delinquent borrowers and help them complete a short sale before the home is repossessed. Loan Resolutions projects the campaign will “dramatically increase short sale closings.”
Short refinancings are being promoted by WayForward Realty. The strategy involves refinancing an upside-down mortgage with another lender and obtaining a short-sale discount from the existing lender. WayForward claims it has the necessary experience to negotiate with the existing lender.
