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Treasury officials be announcing that they will be providing a new subsidy to promote short sales as a way of avoiding foreclosure. This foreclosure subsidy will include a payment of $1,000 to the loan service provider and $1,500 to the seller. This is to encourage a homeowner facing foreclosure to pursue a short sale rather than letting the lender forclose. The purpose behind this new subsidy is to clear the excess inventory. The Treasury may also looking to facilitate this transaction which will result in less loss to the lender than in the case of a foreclosure.
In San Diego and Orange County, California we just have seen our first short sale payoff that gives the homeowner that has a pending mortgage foreclosure money back if they close by a certain date. The money going to the seller is approximately $2,000.00, higher than the amount quoted above. Presumably since homeowners familiar with the foreclosure process can expect “cash for keys” this new subsidy will encourage homeowners to short sale rather than let it go to sale.
