HAFA – Homeowners, REALTORS, Servicers, Investors – Here comes the Streamlined Short Sale Program…So what do you think?
I could initiate this blog with some stats about the number of homeowners who are facing pre-foreclosure but the media at large is doing that sufficiently well enough. The numbers are growing and REALTORS in an effort to assist buyers and sellers have been attending classroom and online educational sessions in droves with the goal of increasing the % of successful short sale transactions and reducing the # of Foreclosures. One caveat before I continue –
“SHORT SELLING IS NOT THE ONLY PRE-FORECLOSURE OPTION FOR HOMEOWNERS”
In fact with the institution of the HAFA ( Home Affordable Foreclosure Alternatives) program – slated to take effect April 5, 2010 – lenders MUST first evaluate /advise homeowners on HAMP ( Home Affordable Modification Program) loan modification programs prior to any consideration of the HAFA short sale option.
One of the goals of the new HAFA program is to simplify and streamline the use the short sale option by incorporating the following unique features: 1) uses borrower financial and hardship information already collected in connection with consideration of loan modification 2) allows borrowers to receive pre-approved short sales terms before listing the property ( including the minimum acceptable net proceeds) 3) disallows foreclosure sales during the marketing period specified in the SSA short sale agreement. 4) must pay commission stated in listing agreement but not to exceed 6% of the contract sales amount 5) REQUIRES BORROWERS TO BE RELEASED FROM FUTURE LIABILITY FOR THE FIRST MORTGAGE DEBT – NO CASH CONTRIBUTION, PROMISSORY NOTE OR DEFICIENCY JUDGEMENT IS ALLOWED
So Who Is Eligible for HAFA?
Borrowers who are unable to retain their home under the HAMP program and their loan meets the following criteria:
1) The property is the borrower’s principal residence
2) The mortgage loan is a 1st lien originated on or before January 1, 2009
3) The mortgage is delinquent or default is reasonably foreseeable
4) Current unpaid principal balance is equal to or less than $729,750
5) Borrower’s total monthly mortgage payment exceeds 31% of the borrower’s gross income
So why would a servicer want to take part in this program?
A Short Sale vs Foreclosure reduces the need for potentially lengthy and expensive foreclosure proceedings. Homes that remain vacant for lengthy periods of time are subject to deterioration and vandalism. In addition the HAFA program provides the following borrower and servicer financial incentives:
1) $1500 for borrower relocation assistance
2) $1000 for servicers to cover admin and processing costs
3) $3000 in short sale proceeds to be distributed to subordinate lien holders ( on a one for three matching basis)
So why would a REALTOR be interested in this program?
Are you kidding! “Servicers have 10 days to accept or deny a Short Sale Request ( RASS)” The process uses form documents and has performance deadlines! Upside – % of successful short sales increases - Downside –the inventory of distressed properties potentially climbs faster – rate of distressed properties sold increases - potentially impacting prices downward at a steeper rate.
I am no Ivy League economist but I prefer to take a chance on the accelerated price reductions … So what do my colleagues think ? How do you think the pending HAFA program will impact your business?
* HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks. Servicers may implement the program before the April 5, 2010 date if they meet certain requirements.