Short Sales Get New Rules - How to Avoid Foreclosure

Families under water in debt and facing foreclosure have several different options

. You may have seen commercials for debt negotiation, or you may have heard about loan modifications. There is also a practice called short selling, that the Home Affordable Foreclosure Alternatives (HAFA) program gave new rules. These new regulations are good for some homeowners, but others still won't qualify.A short sale is when you and your lender make an agreement to sell your home as a way to avoid foreclosure. Don't think that the bank is doing you any favors by offering you a short salebanks tend to just offer short sales when they believe they can lose less money. Short sales benefit both the bank and the borrowerthe lender won't lose as much money as they do in foreclosure, and your credit history won't have the typically big impact of a foreclosure. But, the borrower does not keep the house, and the borrower may still have to pay the deficiency, or the difference between the lower selling price and the higher value of the mortgage.These are a few things that HAFA changed to make short sales more efficient:1. Pre-approved terms of sale. Before, many people just walked into a short sale without knowing whether their lender would accept the terms of the sale of the house. Now, this rule makes it so banks are less inclined to just back out of a sale for any reason whatsoever because they have terms that are spelled out beforehand.2. Eligibility requirements. A lot of people - just like with loan modificationsapply for a short sale who weren't able to qualify. Today the qualifications for short sales are clear. In order to be approved according to the new regulations, your mortgage must have been signed prior to 2009, the unpaid principle must be under $720,750, and the house must be your primary residence.3. The lender has to do more work. Thankfully, a lender has to approve or deny a short sale within 10 days--also, they will be required to offer a short sale to people facing foreclosure. One of the best parts of this plan for homeowners is that lenders aren't allowed to collect deficiency balances for the first or second loan. These new rules will help many people who face foreclosure today, but unfortunately, a short sale isn't going to get everybody protection from foreclosure. There will still be those hard working folks who wont be approved for a short sale for whatever reason and need another way to get protection from foreclosure.A lot of times short sales can be more beneficial than a foreclosure, but for families who cant get one there are other possible options. Moreover, you get a protection from creditors in a Chapter 13 bankruptcy that you may not get in a short sale. Your harassing creditor calls will stop. More than anything else, though, you can get protection from foreclosure in a Chapter 13 bankruptcy. Chapter 13 bankruptcy can offer hardworking families the fresh start they need to put debt behind them and to stay in their home.

Short Sales Get New Rules - How to Avoid Foreclosure

By: James Brown

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