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Short sale lease back – is it an option for you?


Friday, May 10th, 2013
Issue 19, Volume 17.
Mike Mason
Mason Real Estate


The Short Sale Lease Back Program may allow some qualified homeowners to stay in their home after a short sale. Certain banks will approve short sale lease back transactions on certain loans as long as the homeowner has a valid hardship and the short sale terms are acceptable to the bank.

This new program requires completion of a specialized course. We at Mason Real Estate recently received this certification and now offer this game changing program to homeowners looking for a new foreclosure alternative.

The pilot program has successfully completed lease back transactions locally and has more applicants in the process toward completion. This provides a more attractive solution for homeowners who cannot afford their homes but want to stay in their homes.

The Background

The SSLB Program was inspired by changes to the federal Home Affordable Foreclosure Alternatives short sale program. Program founders designed it to help distressed homeowners find an alternative to foreclosure and more quickly return to the housing market as buyers.

In recent years, banks and servicers have required that a short sale be an "arm’s length" transaction, meaning the buyer and seller could not be related and could not have a prior agreement for the homeowner to stay in the property.

The U.S. Treasury Dept. in March 2011 issued a supplement, or amendment, to the HAFA guidelines to allow "servicers the discretion to approve sales to non-profit organizations with the stated purpose that the property will be rented or resold to the borrower, so long as all other HAFA program requirements are met." It further strengthened that option in a November 2012 supplement that smoothed the process for such a sale.

Program Details

The SSLB Program is monumental and game-changing, providing a more attractive solution for homeowners who cannot afford their homes but have valid economic hardships and with steady incomes can afford a lease payment.

Here is a program overview:

Homeowners must work with a licensed agent who is trained and certified by the Short Sale Lease Back Program.

A qualified non-profit would purchase the home in a short sale.

The homeowner’s lenders must approve Advertisement
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of the lease-back terms – the intent of the sale and tenancy cannot be hidden from the lien holders.

The seller would lease the home for up to three years, allowing their credit to heal so that they could qualify for a mortgage and re-enter the market.

Homeowners must attend ongoing HUD and financial-literacy counseling and speak with legal and tax experts to ensure the program is the right fit.

Not all homeowners qualify for the program. Borrowers must have sufficient income to afford the monthly rent payments in addition to their other debt payments.

Homeowners who don’t qualify for the program can still complete a traditional short sale, which may include a relocation incentive from $2,500 to as much as $45,000, depending on their lender, loan amount and individual situation.

Either option is better than a financially devastating foreclosure, which can crush a consumer’s credit, hinder their ability to find a future rental, and perhaps even impact their jobs.

Banks prefer short sales over foreclosure and even loan modifications because they net 12 percent to 25 percent more money from the transaction and it is a more agreeable solution to the involved parties.

Not all lenders, servicers or investors will allow the homeowner to remain in the home after a short sale. This is a pilot program from the realtor side of the transaction and each transaction must be individually reviewed and approved.

Do You Qualify?

The Short Sale Lease Back Program is now interviewing applicants. To qualify, homeowners must:

Live in the property as their primary residence.

Have steady, verifiable income.

Have a valid hardship and be able to qualify for, and complete, a HAFA short sale.

Want to know if you qualify? Call us today to make an appointment.

If you have questions regarding available inventory to purchase or the current bank servicer’s short sale incentives to sellers, contact Mike Mason, Broker/Owner of MASON Real Estate DRE: 01483044, Board of Director of your Southwest Riverside County Association of Realtors® (SRCAR), Short Sale & Foreclosure Resource certified by National Association of Realtors® (NAR) at Mike@GoTakeAction.com or (951) 296-8887.


 

2 comments

Comment Profile ImageOscar Morante
Comment #1 | Friday, May 10, 2013 at 5:12 pm
Hi,

I couldn't help to put a comment on this site about the lease back.

I am in Portland, Oregon and have been in the short sale business since 2003. Right now I am the principal broker of PDX Experts, Real Estate, LLC. I have closed dozens of transactions.

First time I hear about this lease back option. Maybe that works on other states. This is my experience and opinion. I believe most of this arrangement are designed to "keep the homeowner paying.". The way the programs are presented, they sound like a good idea, but in reality the end up being another collection tactic. The homeowner pays longer into the mortgage. More profit for the bank. Foreclosure later anyway. That is my opinion.

Now here is the caveat. If the property has any chance of eventually developing equity, and the mortgage is no more than paying rent, then it may be a good deal. Otherwise, most likely not a good deal.

Here are other options to consider:
- Option 1: Don't Pay and Stay - Don't pay and stay in the property as long as possible. Then postpone foreclosure by filing bankruptcy. You can do this several times and gain a lot of free rent time. Go to www.ForeclosureStopBook.com
- Option 2: Move Out - Abandon the property if it makes sense to move somewhere else. Maybe that is best. Compare with option #1.
- Option 3: Short Sale - Now a days banks are really flexible on short sales. I am getting just about all my short sales approved. This option is specially good when there are 2 mortgages and specially if there is an HOA. This is the cleanest way out sometimes.
- Option 4: Let Foreclose - This is a valid option for sure. This is what often is easiest to do. However, if foreclosure takes too long, the homeowner may end up owing HOA fees, getting a judgment on the second mortgage, or on both.
Comment Profile Imagegood into Oscar
Comment #2 | Tuesday, May 14, 2013 at 5:01 pm
I think I will take your advice. I will not pay and stay as long as I can. Thanks.

Article Comments are contributed by our readers, and do not necessarily reflect the views of The Valley News staff. The name listed as the author for comments cannot be verified; Comment authors are not guaranteed to be who they claim they are.

 

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