New Short Sale Rules Kick in on Monday

by Sage Dillon on April 2, 2010

 

Photo from Flickr - Oregon State University Archives

The Home Affordable Foreclosure Alternatives program (aka HAFA) is supposed to help homeowners who are unable to retain their home under the Home Affordable Modification Program (aka HAMP) by providing short sale incentives  and guidelines.

Here are a few highlights from the program, which begins this Monday, April 5:

  • Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
  • Requires borrowers to be fully released from future liability for the first mortgage debt and, if the subordinate lien holder receives an incentive under HAFA, that debt as well (no cash contribution, promissory note or deficiency judgment is allowed).
  • Uses a standard process, uniform documents and timeframes/deadlines.
  • Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to a $1,000 match for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders.

This 14-minute video from NAR Government Affairs digs into more details with answers to questions such as, “Are servicers required to participate in HAFA?” (2:57)

If you just can’t get enough of this stuff, you can also view the 49-minute webinar, “Understanding HAFA: The Home Affordable Foreclosure Alternatives Program,” and read through NAR’s HAFA Information Packet.

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New Short Sale Rules Kick in on Monday | Real Estate Investing
April 2, 2010 at 1:53 pm

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Linda Rehwalt April 2, 2010 at 4:12 pm

The job of the real estate agent is still the same. as it always has been but the short sale creates more work than a normal sale. Why do they want to reduce our income?

Short Sale Software April 5, 2010 at 8:49 am

It’s going to fail, or at the very least drastically under perform expectations. I wrote about this on my own blog. First of all, the program is non-compulsory, and there are no consequences for not following the guidelines. Secondly, you must be in line with many of the HAMP prerequisites, which themselves exclude many. It’s also not investor friendly and banks must predetermine the amount of loss they are willing to take, eliminating some of their flexibility in making decisions on a case-by-case basis. I think the results will be underwhelming, for sure.

Kathy Howe, Sedona, AZ April 8, 2010 at 12:00 pm

Sage, thanks for the post!
What a concept: having the negotiations with the lender begin before listing the property! That alone should knock 2 months off the process and the seller should retain some dignity.

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