Foreclosure Alternatives Program Helps Both Buyers And Sellers With Short Sales

The Obama Administration recently announced a new program to assist lenders, borrowers, and buyers with short sales.  A "short sale" arises when a home's value falls below the remaining mortgage balance on the home.  Lenders will often accept a "short sale", that is, less than they are owed on the property, in order to avoid a greater loss that might occur if the property went to foreclosure.  This new program, the Foreclosure Alternatives Program (FAP), works together with the Making Home Affordable Modification (MHA) program to encourage less costly work-arounds than foreclosure for those who are struggling financially with homeownership.

Financial Incentives under the Foreclosure Alternatives Program (FAP)

The new FAP guidelines provide financial incentives to lenders and borrowers who successfully complete a short sale.  In addition, standardized forms and procedures are designed to simplify the short sale process for all parties involved, including the subsequent buyers of the distressed property.  When a short sale is successfully completed under this program, lenders receive a $1,000 incentive and borrowers (the homeowner) receives $1,500 that can be used toward relocation costs to a more affordable home.  Further, the government program will contribute, through matching funds, up to $1,000 to compensate junior lienholders on the property.

Qualifiying for the Foreclosure Alternatives Program

To qualify for the Foreclosure Alternatives Program, a borrower must meet the eligibility requirements of the MHA program, but  then must fail to qualify for the program or fail to complete the modification trial period specified by the MHA program.  If eligible for FHA, the borrower is allowed at least 90 days to attempt to sell the property through a qualified real estate professional, and may be permitted up to 1 year to complete the sale, depending on local market conditions.  During the sale period, the lender agrees to not foreclose on the property.

Contact Your Real Estate Professional For Additional Information

If you believe you may qualify for the Foreclosure Alternatives Program, contact your real estate professional to discuss your eligibility and options.  If you do qualify, we can help you, together with your lender, to get your home sold.  If you are a first-time home buyer looking to purchase a home, special buyer incentives are also available for you:  up to $8,000 in tax credits that can be applied toward closing costs and your down payment.  

As professional real estate agents, we bring buyers and sellers together in positive ways, working with you, your lenders, and goverment programs to find solutions that work for everybody.

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