Owners Will Be Encouraged to Short Sale Their Homes….To Themselves?

That’s right, to themselves.  At least that is how a new program called Loan Refinance Assistance Pilot Project is being billed.  The program encourages homeowners who owe more on their home than it is worth to move forward with a short sale.  The tricky part is that the homeowner doesn’t sell the home to a third party.  Instead, the Oregon Housing and Community Services (OHSC) assumes the cost of the owner’s loan and then they and Further Development LLC negotiate with the lender to obtain a new loan for the owner based on the home’s current value.  The new mortgage is then passed back to the home owner.

Funds for this program which has been under development for  more than a year will come from the federal Hardest Hit program which aims to aid states most adversely affected by unemployment and foreclosures over the last five years.  Oregon Homeownership Stabilization Initiative (OHSI) is the state agency which has been tabbed to manage the more than $220 million in Hardest Hit funds.  They will make $10 million of that money available through this pilot program in Deschutes and Jackson counties.  The $10 million is expected to help approximately 300 homeowners in the two counties initially.  The goal is for those 300 homeowners to refinance after one year thereby “recycling” the funds and making them available to more underwater owners.

Just because a home is underwater doesn’t mean that the owner will automatically be eligible for the program.  OHSI is promising an Eligibility Exam on their website in the near future leaving us with few details at the moment.  However, we do know that to be eligible homeowners will be required to have an income level high enough so they can afford the new, renegotiated payments.  They will also need to show that their current financial distress is a result of recent hardships such as a reduction  in work hours or medical expenses.

No date has yet been given for when the Loan Refinance Assistance Pilot Program will become officially available though reports indicate that it will be “soon.”  Keep checking the OHSI site for updates.  There is also information on the site about preventing a foreclosure.

About Dan Seim

Dan Seim is the primary contributor to Preferred Residential's blog. He has been writing about real estate issues that affect home owners in Bend and Central Oregon since 2011.