An SSLB or short sale leaseback program allows homeowners to remain in their house after a short sale. They simply rent it from the new owner rather than vacating when the sale closes. This may seem like an unusual way to structure a sale, and that’s certainly true. When short sales first became popular, all transactions had to be at “arm’s length”. But a 2011 amendment to the Making Home Affordable program opened up the possibility of the leaseback option. Here’s the specific language in the amendment (clarifying notes in italics):
“This Supplemental Directive amends this restriction (requiring arm’s length transactions) to allow servicers the discretion to approve sales to non-profit organizations with the stated purpose that the property will be rented or resold to the borrower, so long as all other HAFA program requirements are met.”
In this arrangement, you sell your home to a non-profit and they lease it back to you for a set period of time. When you have rebuilt your credit and can be approved for a new loan, you can buy back your house. Of course, there are some important questions you should ask before you agree to this arrangement (it’s also a good idea to get legal advice):
Does my bank participate in this program? You can only legally pursue this option with your lender’s complete knowledge and approval.
Is the organization involved really a non-profit? The lender should evaluate and verify that this is true, but you should also do your own research.
What is the NPO getting out of this? They aren’t supposed to be in it to turn a profit, so why are they really in the business of SSLB?
What protection do you have from being price gouged when it comes time to buy back your home? You might find yourself paying more than the home is really worth, putting you right back where you started – upside down on a mortgage again!