There are three major changes in short sales about to come into full affect.

1.) Prior to new HAMP and HAFA guidelines, a homeowner short selling their house could not receive any proceeds from the closing whatsoever. But, as of November 2009, a new HAFA (Home Affordable Foreclosure Alternatives Program) allow the homeowner to be paid $1,500 as a borrower relocation fee. HAMP stands for (Home Affordable Modification Program) and applies to loan modifications.

2.) Prior to these guidelines, 1st mortgage lenders could also request a promissory note which was usually a 0% interest note paid over a certain number of years to cover a deficiency.

3.) Lenders could come after the homeowner for the difference of what was owed and what the lender received as a payoff.

These guidelines apply to loans not owned or guaranteed by Fannie Mae or Freddie Mac. Also, these new guidelines apply to servicers who are participating in these HAFA and HAMP programs.

* Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.

* Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.

* Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

* Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).

* Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).

* Uses standard processes, documents, and timeframes/deadlines.

* Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).

* Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

The fourth point down, about the lender not being able to file a deficiency judgment or ask for a promissory note, is a big one. Many homeowners in Georgia who we have helped have always worried about the lender coming after them or having to owe huge amounts of cash after a short sale.  If your 1st mortgage lender participates in the HAFA program, it prohibits them from doing so. Find out if your servicer is participating in the HAFA program, please visit http://www.MakingHomeAffordable.com/contact_servicer.html

For tons of questions and answers for these programs, go here: http://makinghomeaffordable.gov/borrower-faqs.html#1

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