The Federal Housing Finance Agency (FHFA) implemented the federal Servicing Alignment Initiative last year and, in 2012, this new federal incentive plan should boost the number of short sales here in Florida, which is great news for home owners wanting to avoid a foreclosure.

What is the Servicing Alignment Initiative?

The Servicing Alignment Initiative is a way to force mortgage lenders with delinquent home loans that have been guaranteed by either Freddie Mac or Fannie Mae to streamline their policies and operating procedures when dealing with home loans that have gone delinquent.  In other words, it’s a way for the federal government to try and get this housing mess solved by getting the lenders to operate in an efficient and consistent manner, across the board.

The good news for home owners is that the Servicing Alignment Initiative works – or it’s suppose to work – to keep home owners in their homes by encouraging (read that pushing) lenders to find ways to resolve delinquent notes other than foreclosing.  From the Freddie Mac site:

The alignment will help Servicers resolve delinquencies more consistently and efficiently, keep more borrowers in their homes whenever possible, and minimize losses to the GSEs and taxpayers.

How Does the Servicing Alignment Initiative Work?

For home loans that are backed by Fannie Mae or Freddie Mac, the federal program works on mortgage servicers and home loan lenders in the areas of: (1) borrower contact, (2) delinquency management practices, (3) loan modifications and alternatives to foreclosure, and (4) foreclosure time lines.   It does this with money incentives and mandatory fees.  That’s right: the feds are offering money incentives to get this ball rolling.

Working with the lenders, the Servicing Alignment Initiative is designed to do several things, among them:

• Improved service to borrowers
• Clear borrower communications
• More efficient processing of loan modifications

How Does This Help Florida Home Owners Thinking About a Short Sale?

One thing that the FHFA’s Servicing Alignment Initiative does is make short sales that much more favorable to the mortgage lenders.  Not only are the Florida lenders – facing the huge bottleneck of foreclosures already on the books – finding short sales a better alternative to filing more foreclosure law suits, but the Servicing Alignment Initiative does something ever better, speaking the very language of banks:  money. Under this new FHFA Servicing Alignment Initiative, mortgage loan servicers will get paid money now to proactively communicate with their delinquent home loan borrowers – and that’s going to help push short sales into a very popular position in 2012.

That, plus the fact that short sales need to be done before the end of 2012 in order to avoid federal income taxation on the seller who avoids a delinquency (more on that in a future post).

Increased Bank Communications on Your Delinquent Mortgage Home Loan? Be Careful, Be Wise

One of the things that the Federal Servicing Alignment Initiative does is push the banks to communicate and negotiate with bank customers.  Which means that home owners with past due mortgage payments may start getting more letters and phone calls and emails from their mortgage servicer.

That’s good.  And that’s bad.

It’s good to start communications because that is how deals get done.  It’s bad if the home owner isn’t prepared to protect his legal rights when dealing with an adversary: and these days the bank is your adversary, not your friend, no matter how friendly they may be.  Not all Florida banks are the same and not all Florida banks deal with people the same way: you need to know who you are dealing with just as much as you need to know what law applies in these situations.

Having an experienced Florida short sale lawyer or Florida real estate attorney in your corner is important.  The bank will have its own legal team, it is smart to educate yourself about Florida law and how it applies to your circumstances before you start negotiating a loan modification or finalizing a short sale (and negotiating that deficiency) with your bank.