Program seeks to speed up backlog of foreclosures

Trustees would conduct short sales while homes are still tied up in bankruptcy

Underwater mortgages
Underwater mortgages

A new pilot program could help Freddie Mac, Fannie Mae and large lenders expedite the sale of underwater homes currently mired in the bankruptcy process.

U.S. bankruptcy trustees are aiming to significantly reduce the time it takes to deal with distressed homes by essentially conducting short sales during the bankruptcy process, rather than going through with foreclosure, the Daily Business Review reported. The program is meant to more quickly process homes that have been tied up for years in Chapter 7 proceedings in state courts, which have prevented lenders from repossessing properties, according to the news site.

Lenders were initially opposed to the idea, in part because they didn’t want to take a loss on properties that were once high-value investments, Kenneth Welt, a trustee and advocate for the program told the Business Review.

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“But when they started looking at their spreadsheets and seeing years of no income and properties losing value, they realized this now makes sense,” said Welt. [Daily Business Review]Tom DiChristopher