First, something really important: Your servicer (lender) cannot require a cash contribution or promissory note from you AND must give up any right to pursue a deficiency judgment against you. This would apply to the first mortgage, not a second or HELOC.

REQUIREMENTS FOR CONSIDERATION:

·         The property is owner-occupied

·         The mortgage loan is a first trust deed originating before 1/1/2009

·         The mortgage is in default, or default is reasonably foreseeable

·         The current unpaid balance is equal to or less than $729,750

·         The borrower’s monthly mortgage payment exceeds 31% of his/her gross monthly income

The servicer has thirty days from receipt of your request to consider your request. If it’s granted, then the owner will have to put together a financial information package. With this in hand, along with a BPO and some title work, the servicer will decide whether or not to approve your request. It’s unclear how long the lender/servicer has, and this part of the process has always been sticky.

IF YOU’VE BEEN APPROVED:

The servicer will provide you with a Short Sale Agreement outlining the requirements of each party. Below are a few examples. You must sign and return this agreement, along with your listing agreement, to the servicer within fourteen days.

·         You and the servicer will agree on a list price. Keep in mind a BPO will have already been ordered, so this price will be close to a servicer’s drop dead, take it or leave it threshold.

·         Your property must be marketed for 120 days at minimum

·         Allowable transaction costs must be outlined

·         A clear and agreed-upon real estate commission for the listing broker

·         A letter of authorization from you allowing the servicer to communicate with the broker

·         An agreement releasing you from a deficiency on the first mortgage (NOT the second)

·         Confirmation that you will receive $1,500 from Making Homes Affordable for relocation expenses

·         What monthly mortgage payment will be required from you during the marketing period

There’s more, including what impact a short sale will have on your credit. There are also other timelines to be met and guidelines on what to do with second trust deed holders (including HELOC’s). But the above is the gist of it.