It looks like there is a little glimmer of hope  for thousands, if not millions, of homeowners and home buyers that are currently dealing with short sales.

A short sale goes into effect when a home owner needs to sell his or her house but the value of the home is well below what the home owner owes on their mortgage.  There could be a lot of reasons that people find themselves in the position of having to participate in a short sale.  Some include:

• interest rates re-setting after the initial period of an Adjustable Rate Mortgage,
• divorce
• job transfer
• job loss
• medical issues
• people using “exotic” mortgages to purchase homes during the big housing boom in the early 2000s

Whatever the reason, people are trying to sell their home in order to avoid outright foreclosure.  If you look at yesterday’s post, you’ll see that there are a lot of people who have negative equity in their home.

The US Treasury Comes to the Rescue

The US Treasury has put out some new regulations about short sales.  Some of the most significant aspects of the new policy is that banks will need to respond to offers from potential home buyers within 10 days of receiving the offer.  This does not mean they have to accept the offer.  The can turn it down outright or, perhaps, counter offer.  However, this si a huge change from the way things are currently run in which banks typically take months to respond, if they respond at all.  I suspect there will still be delays since the banks can always come back to say they are missing documentation to make a decision. Still, it’s a good step in the right direction.

There are other nice features that help the home seller with moving expenses as well as incentives to the banks and investors to pass along the home with distressed mortgages to home buyers that want to purchase them.

Here is a short video with Margaret Kelly, the CEO of RE/MAX International, explaining some of the highlights of the new policy.