Obama’s advisers finalized the new short sales guidelines on November 31, 2009. The administration hopes that the use of short sales will reduce the amount of losses on bankrupt properties.

These new regulations would allow a buyer to get out from under their loan by selling their home to a potential new buyer for less than the balance owed on the home. This type of transaction would still require approval from the lender.

The amended program would also allow the buyer to transfer ownership of the property to another more capable buyer through the use of a “deed in lieu of foreclosure.” Short sales are considered more profitable than allowing the home to go into foreclosure status. Foreclosed homes end up losing value due to the fact that they become vacant properties and, in many cases, receive extensive damage from vandalism.

Included in this modified program is a provision that allows a buyer to receive $1,500 if they sell their home for less than the amount owed on the property. In addition, the plan pays $1,000 to the mortgage servicing company that completes these types of transactions.

This program is available to homebuyers who applied for the federal mortgage modification program but were turned down due to qualification issues. Others may qualify for this federal assistance program if they are behind on an already modified loan, or are seeking a deed in lieu of a foreclosure transaction.

It is the hope of the Obama administration that the reworked $75 billion foreclosure prevention plan will reduce already staggering foreclosure totals to a manageable amount. In addition to making short sales less painful for both buyer and seller, the plan includes financial incentives for banks and mortgage companies to rework past-due loans.

Borrower protections have been assigned within the revised program. Once the short sale has been completed, the program requires that the borrower be eliminated from any future financial liabilities.