The spate of notices of default being issued to homeowners defaulting on their mortgage payments continues unabated in the US. The state of California was home to about 43,000 notices of default last month, and nearly 2,500 of these pertained to Orange County.

Short Sales: An Attractive Option

However, distressed homeowners in Orange County may draw succor from the FAP {Foreclosure Alternatives Program} that has been set rolling by the Barack Obama administration. It is reassuring to owners if the government itself appears keen to stem the tide of homes succumbing to foreclosure. Given the political will, perhaps not every notice of default will necessarily translate into a foreclosed property.  

The FAP essentially enables lenders and borrowers to implement short sales and deeds-in-lieu-of-foreclosure under certain circumstances. The short sales provision of the program became operational on May 14, 2009 and is to be in effect through 2012. Property owners in Orange County can conveniently opt for short sales, if they are eligible under the HAM {Home Affordable Program} but fail to qualify for a loan modification.

The short sale agreement allows the homeowners a period of 90 days {extendible to one year, depending on the local real estate market conditions} to market and sell their properties. The properties must be listed with a licensed real estate agent, and may not be foreclosed during such specified time.

Incentives for Homeowners and Banks

The FAP offers several incentives to banks and the beleaguered homeowners in Orange County. These include $1,000 offered to banks for successfully completing a short sale. In addition, homeowners are being doled out $1,500 to ease their relocation expenses. Besides, there will be federal aid of up to $1,000 to meet the cost of getting lien holders to release their liens. The banks and mortgage companies have also begun offering their own incentives to encourage homeowners to complete short sales.

None of the new federal programs might dispel the dark foreclosure specter looming large in the sky, but the measures represent the hope of a silver lining to the affected homeowners and banks.