The intent of the fund is to allocate $1.5 billion in federal funding to aid distressed low and moderate-income homeowners who are falling behind on their mortgages and risk foreclosure.

The first round of funding went out to the HFAs in the states of California, Arizona, Florida, Michigan and Nevada, the hardest-hit states in the housing market crash and coincidentally, five of the states that top the list of most foreclosures reported in the first six months of 2010.

A second wave of funding was approved to the states of North Carolina, South Carolina Ohio, Oregon and Rhode Island.

State HFA’s issue untaxed state bonds to help first-time low-income buyers purchase single family homes under fixed low-rate 30 year mortgages, but many have cut or even suspended their programs since the housing crash began.

State HFAs are receiving the federal monies and accepting applications to qualified homeowners whose financial hardships, such as family disaster or unemployment, have put them at risk of foreclosure.

While the Obama administration feels these programs could stop the increasing rate of foreclosures across the country, (RealtyTrac recently reported about 1.65 million foreclosures for the first half of 2010) critics claim that the funding is just a temporary bandage to a significantly deflated market, and may even prolong the housing crisis.

Critics claim that after the aid is granted and runs out, the market will still be at bottom at an inflated market.  Some realtors believe until the market truly bottoms out and inflated loans are flushed out with short sale and foreclosures, the market will not be able to legitimately recover.

California’s CalHFA was recently approved for $700 million in federal funds for their Keep Your Home program, the details of which can be found at their web page if local homeowners would like to see if they qualify.

If your house is located in the Southern California and you would like a good Realtor in Glendale to handle your property, give us a call.

In essence, a short sale is getting a lender to take a loss on their initial inflated terms of mortgage, allowing the homeowner freedom from the initial debt. This can be a very convoluted process, since many lenders may be involved and all will have to agree on the loss.  A buyer is necessary as well, and though short sales typically have a very attractive price tag, most of the time cash is the preferred method of payment since convoluted financing is what caused the unreasonable mortgage to begin with, and cash is much better to cover losses than credit that may not be there in the future.  It’s not uncommon for there to be at least 10 or 20 offers on a home being short sold, and oftentimes the offer with the most cash constitution—not necessarily the highest dollar amount, is the most desirable.

This can be a good thing for investors, as they typically have much greater capital than families or first-time buyers, but the process can be extremely arduous and contain rolls of red tape based on the number of parties involved that have to negotiate and agree on the deal. Many short sale offers ultimately fall through.

This is where the Obama Administration is attempting to step in. With a new standardized short sale plan that is rolling out this year, parties involved are required to use uniform documentation, pre-approved terms and accelerated turn-around times in an attempt to avoid the long drawn out negotiations that sometimes ruin short sale offers. It also offers incentives in the way of homeowner relocation grants, mortgage servicing fees, real estate agent commissions and stipends for secondary lenders and investors.

Though the jury is still out as to whether the streamlining will be effective and encourage more short sales to be initiated and taken to completion, it seems any kind of standardization process will be in favor of investors with cash capital that can benefit from purchasing these homes, as well as homeowners that need to free themselves of over-inflated mortgages.

If you are interested in learning more about the short sell process or want to invest in properties that are offered for short sale  please call me at 818-241-5196.