Illinois homeowners may consider alternative to foreclosure

With so many homes in foreclosure in Illinois, the new guidelines recently released by the Federal Housing Finance Agency may make short sales a more viable option for distressed homeowners. The guidelines are an attempt to speed up the short sale process to make it a more attractive alternative to foreclosure for lenders as well as homeowners. Lenders will be able to approve short sales for certain types of hardships without additional approval from Fannie Mae or Freddie Mac.

Hardships that won't need additional approval are divorce, job relocation, disability, or death of a borrower or co-borrower. The new guidelines also look to reduce or even eliminate some of the paperwork required when homeowners are seriously delinquent in their mortgage payments and in financial distress. Speeding up the short sale process and making approval easier may help keep many homeowners out of foreclosure.

In addition, the new guidelines require lenders to make a determination within 30 days of receiving a short sale offer. If they are unable to make the determination within that time, lenders are required to keep in touch with homeowners on a weekly basis to let them know how the process is going. Lenders are required to make a decision no longer than 60 days from the receipt of the short sale offer.

These and other guidelines may make short sales more attractive to both homeowners and lenders, eliminating the threat of foreclosure. However, if a short sale is not a viable option for a homeowner, and they are still facing foreclosure, that homeowner may want to consider filing for bankruptcy protection. The Illinois laws and United States Bankruptcy Code may provide homeowners with an alternative option to finally conquer outstanding debt and provide the basis for a return to financial security.

Source: CBSNews.com, "Feds move to speed home "short sales"," Ilyce Glink, Aug. 21, 2012

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