It remains a mystery to me why banks couldn't come up with a program like this on their own, but with oversite from the federal government a program was unveiled this week which provides some much needed guidance and clarification to programs which can help homeowners avoid foreclosure, particularly Deeds in Lieu and Short Sales.  The program is being referred to as HAFA, which stands for Home Affordable Foreclosure Alternatives. 

Here are some of the keys to the program:

1.  Every homeowner must be considered for HAFA before the lender can pursue foreclosure.

2.  The seller must first apply for a mortgage modification, before being considered for a short sale or deed in lieu.

3.  If the borrower and the bank agree that a short sale is the best alternative, the bank agrees to respond to offers within 10 days of receipt of the complete offer (compared to a current average of 2+ months).

4.  The banks forfeits the ability to pursue a deficiency judgement against the borrower (seller) after the completion of the sale.

If all the banks participate in this program, I believe it will allow the market place to more efficiently work through the challenges that foreclosures are currently presenting.  If handled properly a short sale, or deed in lieu, is better for both the borrower (seller) and the bank who holds the note on the home.  It's also better for the health of the market as buyers will be more willing to write offers on short sales if they know the process will be handled efficiently, and homes won't sit vacant and unmaintained for prolonged periods of time. 

Here are links to some websites where more detailed information can be found:

makinghomeaffordable.gov

HAFA-Program.com