Foreclosure cases are by far the most prevalent in our civil court system today.  Although underutilized, the alternative dispute resolution method of mediation is an excellent means of resolving these cases.  The reasoning is logical, although most borrower/defendants don't have enough knowledge of resolution options to clearly understand their leverage. 

There are a handful of methods of settling a mortgage foreclosure case.  (We assist homeowners with all of these approaches.)  They are as follows:

New Program Aims to Simplify the Short Sale Process.

The HAFA (Home Affordable Foreclosure Alternatives) Program was launched in April 2010 by the U.S. Treasury and Fannie Mae to address the problems that typically arise in a short sale transaction. HAFA applies to all conventional mortgage loans held in Fannie Mae's portfolio. A short sale is a real estate transaction in which a homeowner sells their home for an amount that is less than what they currently owe on their mortgage, and the mortgage holder agrees to the sale.

While this may sound like a simple transaction, there are many factors that may complicate the process including the lender pursuing the seller for the difference between the amount that was received from the short sale and the amount that was owed on the mortgage, junior lien holders hindering the transaction because they will not receive any funds from the sale, lenders taking excessive amounts of time to approve offers, and constraints on the release of any funds from the sale to the seller, even for moving expenses.
HAFA aims to address these issues so that more short sale transactions can actually be completed. Some of the ways the Program does this is by providing:

New Florida legislation defines the term "short sale" and lowers the amount of state taxes owed when real property is sold through a short sale. When the sale price of real property is less than the outstanding debt, the state will not collect taxes on the canceled debt. Further, the state will not collect taxes on the difference between the sale price and what is owed on the property.This is good news for sellers in short sale transactions whose tax liability will be lessened by the passage of this bill. To read the full text of HB 109 click here.

One month into 2010 and short sales continue to dominate the real estate market. What's happened since this time last year?  A lot.  Lender and investor policies have evolved considerably since first being overwhelmed by the volume of mortgage defaults and were generally understaffed and undertrained to handle the situation.  Largely, lenders have slowly churned through files as they evolved their approval processes and strategies.  

A year ago, lenders were more apt to offer complete waiver of deficiency, although even then some, like HSBC for instance, had firm prohibitive policies.  Now, complete waiver is the exception.  In Q1 2010, lenders are generally not waiving deficiency.  More likely is an approval letter with either arguably ambiguous language, such as "this satisfies your lien in full," or "this letter may or may not be construed as a forgiveness of debt."  Alternatively, lenders are specifically reserving the right to seek deficiency down the road.  How long down the road?  Five years.  A long time before the seller is out of the woods, but in all likelihood the lender will likely seek it sooner in the form of a settled debt.  That means, in all likelihood and in today's climate, although the deficiency will likely not be waived in full, the seller will be able to negotiate it down to a manageable figure, still resulting in a significant savings.  

Of course, each file is different and the leveraged balanced in negotiation will vary.  However, a short sale largely offers benefits over foreclosure.  Although complete waiver of deficiency is unlikely, reduced deficiency is probable at this point.  Resolution of the matter prior to the foreclosure judicial sale date results in the foreclosure being dismissed in its entirety.  Short sale generally offers credit benefits over foreclosure, translating to the homeowner's ability to purchase or rental of another home.  Further, because resolution of a defaulted mortgage is often enough to enable the homeowner to emerge out of financial hardship, a short sale contributes to the homeowner's avoidance of bankruptcy.  This year's Florida real estate market will undoubtedly be another dominated by short sales.