LIANE HANSEN, Host:
Here to explain what's coming is NPR senior business editor Marilyn Geewax. Welcome back, Marilyn.
MARILYN GEEWAX: Good morning, Liane.
HANSEN: What is this new short sale program? Who will benefit from it?
GEEWAX: But there is one other option on the table and that's a short sale. So this new government program is going to try to reduce foreclosures by boosting the short sales.
HANSEN: Now, explain what a short sale is.
GEEWAX: Well, a short sale is a transaction where the lender agrees to accept less than what the current homeowner owes on their mortgage. And that's not such a bad proposition - both for the homeowner and the lender. Neither of them thought that housing prices were going to fall as much as they did, but here we are. So now they both have to take a hit and the homeowner is going to walk away empty-handed with no equity, and the lender is going to lose on the mortgage but at least the house is sold.
HANSEN: So why are there still so many foreclosures when this option is available?
GEEWAX: It'll set deadlines and it creates a process for the homeowners to get pre- approved on their short sale terms. So that's even before they list the property. That means the lender has agreed to a list price and the potential buyer knows right off the bat what's going to fly - so what would be the minimal amount acceptable to the lender.
HANSEN: So what do you think, Marilyn, do the people in the industry expect this to work?
GEEWAX: These last three or four years have just been so horrible. I don't think anybody out there is expecting overnight miracles. But agents say that if the lenders would properly staff up for it, these short sales could finally start to mop up a lot of these houses that are underwater. When you use that term it means mortgages are bigger than the sales price for the house. And for the economy to start to heal again, the housing market has got to start moving again.
HANSEN: NPR senior business editor Marilyn Geewax. Thanks a lot, Marilyn.
GEEWAX: Oh, you're welcome.
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