New "short sale" program to begin April 5

The New York Times reports today that the Obama administration will launch a new program that promotes the use of short sales to jump start the nation's real estate market. Because of the precipitous decline in value since the peak year of 2005, many homeowners now owe more on their mortgages than their homes are worth, putting them "under water." The various mortgage modification programs attempted thus far have had little impact, so it's wise to try something new. Short sales - a situation where a lender agrees to take less than is owed on a mortgage to allow a homeowner to sell and avoid foreclosure - worked well back in the real estate collapse of the early 1990s, but they just haven't been employed much this time which is unfortunate. Under this program, if a homeowner brings a lender an offer to purchase that is lower than the balance of the mortgage, the lender must obtain an independent valuation of the property. If the property is worth the offered amount or less, the lender must agree to the sale and forego the balance of the debt. This program might be exactly what is needed to jump start housing.