The Obama administration launched its foreclosure prevention plan in March and given importance to loan modification and short sale. Here I will briefly explain about how Obama’s plan will help short sale homeower and also the incentive for lender to accept short sale.

Banks could get government incentives for participating in the short sale where bank agrees to accept less than what homeowners owe by selling their home rather than going through the foreclosure. In fact, the lender will lose more money with foreclosure than short sale and short sale will also avoid foreclosure from the borrower’s credit history.

The program, known as Making Home Affordable, focuses on paying lenders to participate to modify distressed borrowers’ loans so that it is affordable for the borrower or allow selling the borrower’s home in short sale. Under this program, if the borrower does not qualify for loan modification then the lender will allow the borrower to do short sale. In these cases, the lender could get up to $1,000 for each successful short sale and the borrowers up to $1,500. The government could also share the cost of second mortgage liens in short sale.

But not all borrowers will be qualified under this program. The borrower’s loan must be Fannie Mae or Freddic Mac backed loan in order to qualify for this program. In order to find out whether you loan is backed by Fannie or Freddie Mac, either call your lender to find out or visit here Fannie Mae or Freddie Mac

I really appreciate that our government took the initiative to help these homeowners but it would have been much better that this plan includes all the distress borrowers (sub prime, 80/20 loans and other types of loan). Well, the other type loan borrowers can still do the short sale and avoid foreclosure. If you are in bay area, then call Blaison (bay area short sale agent) at 510-366-9405 to check if you qualify for short sale.

It is crystal clear that short sale is better than foreclosure for both the lender and borrower. Check my other blog “Is Foreclosure Same as Short Sale?”

Please let me know if you have comments on this post or have any questions, I would be happy to answer any questions and appreciate any comments.