1. Was not offered a trial modification because the loan was NPV negative;

1. Was offered a trial modification but determined that it was still unaffordable (potentially due to very high back end ratio);

1. Failed the Trial Period Plan; or

1. Became 90 or more days delinquent on a HMP modification.

1. Short sale or DIL will not be available if the option is specifically prohibited by the investor.

1. At the discretion of the Servicer, a short sale or DIL may not be available if the foreclosure sale date is already set .

1. The approved sales price of the property less any amounts the investor determines necessary to pay transaction costs that are normal and customary in the community where the property is located, must be less than the full payoff of the mortgage, including any mortgage insurance or credit enhancement proceeds.

NOTE: If the net return from the sale exceeds the full payoff of the mortgage, including any mortgage insurance or credit enhancement proceeds, the transaction is not eligible for servicer, borrower or junior lien holder incentive compensation.

1. The property must have clear, marketable title or the servicer must have a reasonable belief that the title impediments or liens can be cleared prior to sale.
   1. The borrower must disclose to the servicer any title information about any liens or impediments that will impede a sale.
   2. If there are title impairments that can be readily resolved, the servicer will work with the borrower and the borrower’s real estate agent to attempt to clear the title following receipt of an acceptable offer.
   3. If it is unlikely that the title impairments can readily be resolved, the servicer is not required to enter into a short sale agreement.

1. With respect to DIL, servicers may elect not to accept title to properties, e.g. properties that are unmarketable due to poor physical condition, properties affected by the presence of or proximity to hazardous materials or contamination, properties affected by insolvency of homeowner’s associations, properties affected by pending legal action or properties subject to leases.

1. The servicer will, independent of the borrower or other parties to the transaction, determine the current market value of the property in accordance with the investor’s guidelines.  This may include using either;
   1. An appraisal performed in accordance with USPAP,
   2. One or more Broker Price Opinions (based on an interior and exterior inspection of the property) provided by a licensed real estate agent(s) actively working in the community where the property is located, or
2. The valuation must be dated within 120 days of the date the Short Sale Participation Agreement (the “Agreement”) is executed by the servicer; however specific investor guidelines may require more frequent valuations.

1. The servicer will prepare the Agreement.
2. The borrower must sign and return the Agreement to the servicer by the date stated therein but in no event will the Agreement be due back in less than 14 calendar days.

1. Require that the property be listed by a licensed real estate agent experienced in selling properties in the neighborhood.
2. Require that the transaction be arms-length (i.e. not sold to a family member or sold with the intention to transfer the property back to the former borrower after the sale).  If the borrower or purchaser is a real estate agent, such individual may not receive a commission as part of a short sale.
3. State the minimum listing price and/or net proceeds the servicer will accept (net proceeds may be stated as a dollar amount or percentage of market value).  This value will be provided by the servicer pursuant to investor guidelines and at the servicer’s discretion may be adjusted downward if the market conditions warrant.
4. State that the listing agreement signed between the borrower and the real estate agent must contain a disclosure that any sale is subject to review and approval by the servicer.
5. State that the borrower acknowledges that the transaction is contingent on the release of any junior liens or encumbrances and that the servicer is not responsible for ensuring the liens can be released.
6. State the amount of the real estate commission that may be paid in conjunction with the sale and a statement that the servicer will not negotiate a lower commission as a condition of acceptance of an offer.
7. Provide an expiration date and conditions for extensions thereof.
8. Provide a statement that upon completion of a sale under the terms specified in the agreement the borrower will be released from all liability for the mortgage debt.

1. Provide a notice that forgiveness of debt under a short sale or DIL may have tax consequences and a recommendation that the borrower consult a tax advisor.

10.  Include a requirement that the borrower cooperate fully with the listing and sale and will not materially alter the property during the term of the agreement.

11.  State that the borrower will not receive any proceeds from the sale transaction other than borrower incentive offered under the Home Affordable Short Sale/DIL program, which incentive will be paid by the servicer after closing.

12.  At the option of the Servicer/Investor, the Agreement may include a condition that the borrower agrees, subject to the ability to deliver marketable title, to execute a deed in lieu of foreclosure in favor of the investor if the property does not sell prior to the expiration of the Agreement or any extension thereof.

13.  Other terms as determined by the servicer.

1. 1. While a servicer is determining a borrower’s eligibility for a short sale or DIL, waiting for the timely return of the signed Agreement and for the duration of the Agreement and any extension thereof, the servicer may not conduct a foreclosure sale or refer new loans to foreclosure. 

1. During the forbearance of legal action, no monthly mortgage payments will be required from the borrower.

1. If a bona fide purchase offer is submitted at the agreed upon sales price prior to the end of the marketing period specified in the Agreement, the servicer will respond with an Offer Response Letter (Response) within the number of business days specified in the Agreement but in no event more than 10 business days.
2. The Response will indicate acceptance, rejection or specific terms of a counter offer and may be conditioned upon the release of any junior liens or approval from an investor or credit enhancement provider.
3. Servicer may work with the borrower and real estate agent to attempt to clear title and secure release of junior liens, but the servicer is not responsible for ensuring the release of liens.
4. With the borrower’s permission, the borrower’s incentive compensation may be used to obtain release of junior liens or non-real estate title impediments.
5. Upon sale and receipt by the servicer of acceptable net proceeds, the servicer will execute a full release of the mortgage and the servicer will pay the borrower any incentives due under the Agreement.

1. Must be in accordance with investor guidelines.
2. In the event the property does not sell prior to the expiration date of the Agreement or no bona fide purchase offer is received by the end of the marketing period specified in the Agreement or any extension thereof and if the borrower complies with all other requirements of the agreement, the servicer, or the servicer’s legal counsel as required by the investor’s guidelines, will prepare and mail to the borrower a warranty deed and DIL agreement, if:
   1. The servicer indicated in the Agreement that it was willing to accept a DIL,
   2. The property’s condition and circumstances have not changed materially, and
   3. The borrower is able to deliver clear and marketable title.
3. The DIL agreement will state the date by which the property must be vacated and any other terms or conditions, including the incentive compensation payable to the borrower upon vacancy.
4. The borrower must sign and return the DIL agreement and a signed and notarized deed to the servicer by the date stated therein, but in no event will the DIL agreement and deed be due back in less than 14 calendar days.
5. Following receipt of the executed and notarized deed and DIL agreement, verification of clear title and verification that the property was vacated in accordance with the conditions of the DIL Agreement, the servicer will pay the borrower any incentives due under the agreement.
6. Upon recordation of the deed the servicer will execute a full release of the mortgage.

1. Borrowers are eligible for incentive compensation from TARP funds to assist with relocation expenses of $1,500 following successful closing of a short sale or recordation of a DIL.

1. Servicers are eligible for incentive compensation from TARP funds of $1,000 following successful completion of a short sale or a DIL.

1. Investors may, at their discretion and utilizing their own funds, offer additional incentives to borrowers or servicers to secure a successful short sale or DIL.

1. Investors will be entitled to partial reimbursement from TARP funds of amounts to secure the release of any and all junior liens, non-real estate debts or other title impairments on the property not to exceed:
   1. The greater of $250 or 1.5% of the balance due on the account(s).
   2. The total lien release amount payable on any property by a servicer will not exceed a cumulative cap of $3,000.
   3. Investors are entitled to reimbursement from TARP funds of up to $1,000 per property paid at a rate of $1 for each $2 paid by the servicer/investor.

1. In return for the incentive compensation, junior lien holders or other creditors must waive all future claims against the borrower(s).

1. Servicers that execute a 2nd Lien Servicer Participation Agreement must agree to release liens to facilitate a Home Affordable Short Sale/DIL in exchange for the compensation provided herein.

1. Servicers may not charge borrowers any fees for participation in a short sale or DIL.

1. Usual and customary selling expenses paid to third parties for services rendered related to the short sale may be deducted from the sale proceeds.

1. Terminate the agreement and re-commence foreclosure or pursue another foreclosure prevention alternative.

1. Place the borrower on a forbearance plan for the duration of the Agreement period.

1. Immediately offer the borrower a DIL.