Industry NewsMortgage

Feds incentivize short sales

Servicers can't condition approval on reduced commission

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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 ...