'Short Sales' may become 'Shorter'

A recent announcement from the Federal Housing Finance Agency stated that as of November 1st loans held by Fannie Mae and Freddie Mac will start limiting the amount second lien holders can collect at $6,000.  It is hoped that this will reduce greatly the time is takes to close the contracts on these properties since the second lien holders can no longer hold up the process by trying to negotiated higher settlements.  If these properties were to foreclose, the second lien holders would not receive any proceeds from the sales.

In addition, it was also announced that homeowners with significant financial difficulties but not behind on their mortgage payments may also be eligible to short sell their homes.  I know of one major bank who is doing exactly that.  It seems with all of the recent data from foreclosures, the banks may have figured out they are better off short selling rather than foreclosing.  If they foreclose, they risk damage to the asset(dwelling) either by an angry homeowner or vandalism and having to sell at more of a market discount than a short sale.  In most short sales, the property will be taken care of better by the owner since they will probably live in the property until right before the sale closes escrow.