By Ruth Simon, The Wall Street Journal

The Obama administration laid out final guidelines on
Monday that should make it easier for some financially
troubled borrowers to sell their homes.

The guidelines are designed to encourage the use of
short sales, transactions in which the borrower with lender
approval sells the home for less than what is owed on
the loan. The program also makes it easier for borrowers
to voluntarily transfer ownership of properties through a
“deed in lieu of foreclosure.”

Short sales can result in higher prices than foreclosures
and can be less damaging to local neighborhoods,
in part because homes aren’t left vacant and exposed to
vandalism. But these transactions are often difficult to
complete.

Under the plan, borrowers will receive $1,500 from
the government if they sell their homes for less than the
amount of their mortgages. Mortgage-servicing companies
will also receive $1,000 for each completed short sale.

The program is open to borrowers who may be eligible
for the government’s loan-modification program, but don’t
end up qualifying, or are delinquent on their modification,
or request a short sale or deed-in-lieu transaction.

The short-sale program is the latest addition to the Obama
administration’s $75 billion foreclosure-prevention plan,
which includes incentives for mortgage companies
and investors to rework troubled loans. The government
first said in May that it would include short sales in the program,
but it has taken months to finalize the details.

Under the new guidelines, second-mortgage holders can
receive up to $3,000 of the sales proceeds in exchange for
releasing their liens. Investors who hold the first mortgages,
meanwhile, can collect up to $1,000 from the government 
for
allowing such payments.

Borrowers who complete a short sale under the program
must be “fully released” from future liability for the debt,
according to the guidelines.