Treasury Department paying banks and borrowers to short sale vs. foreclosure!

To encourage HAFA participation, the Treasury Department raised financial incentives under the program in late March. Borrowers are now eligible for $3,000 in relocation assistance, and servicers (banks) will receive $1,500 to cover administrative and processing costs for a short sale or deed-in-lieu completed under the program. In addition, the banks will be paid as much as $2,000 for allowing a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders. (you know the ones.. those uncooperative 2^nd mortgage holders who do nothing but screw up the shorts sales for all parties when they choose to “play hard ball” and refuse offers and then get nothing while costing the banks hundreds of thousands of dollars and force the owners into foreclosure!) For the 2^nd lien holders to receive their incentive from the banks in first position, they must release their liens and waive all future claims against the borrower. (as they should have been doing all along, again, instead they chose to take nothing) According to Treasury, the foreclosure alternative options offered under HAFA reduce the need for potentially lengthy and expensive foreclosure proceedings and also help preserve the condition and value of the property by minimizing the time a property is vacant and subject to vandalism and deterioration. The collective thinking, now even in the government, is that short sales and deeds-in-lieu generally provide a substantially better outcome than a foreclosure sale for borrowers, investors, and communities. As investors, we all have known this to true, but getting the home owners a few bucks for their efforts and helping them with the burden of relocating, is great news in my book!