GOVERNMENT ANNOUNCES SHORT SALE GUIDELINES..........

The U.S. Treasury Department announced new guidelines this week designed to make short sales go more smoothly.

Scheduled to launch in April 2010, the Home Affordable Foreclosure Alternatives Program (HAFA) will offer up to $3,500 in incentive payments to qualified borrowers, servicers, and investors who complete short sale transactions for properties with loans on the verge of foreclosure.

HAFA allows the borrower to receive pre-approved short sale terms before the property is listed and frees them from future liability for the debt. Also, servicers utilizing the program are prohibited from requiring a reduction in the real estate commission agreed to in the listing agreement.

To qualify under these new guidelines:

• The property must be the home owner's principal residence.
• The home owner must be delinquent on the mortgage or close to defaulting.
• The loan must have been made before Jan. 1, 2009, and be for less than $729,750.
• The borrower's total monthly mortgage payment must exceed 31 percent of their before-tax income.

The following incentives will apply:

• The borrowers will receive $1,500 from the government for relocation expenses.
• The mortgage-servicing companies will receive a $1,000 from the government to cover administration and processing costs.
• Investors who hold the first mortgage will receive up to $1,000 from the government for allowing the second-mortgage holders to receive up to $3,000 of the sales proceeds in exchange for releasing their liens.

In total, each transaction under HAFA will cost the Tresury up to $3,500 in incentive payments.

Borrowers who complete a short sale under the program must be "fully released" from future liability for the debt, according to the guidelines.