We have put together a breakdown of the new HAFA (Home Affordable Foreclosure Alternatives) program that will go into effect for participating lenders on April 5th.  The new program is an attempt to streamline the short sale process.

CLICK HERE for the complete version, it's pretty long!  Here is the "condensed" version, we now have a printable version of this breakdown along with a list of participating servicers and lenders on the preferred partners site!  We also have now stared a group on here for the HAFA short sale program to get together and discuss the ins and outs, and share issues with each other.


HAFA - Home Affordable Foreclosure Alternatives


Summary


  • Program goes into effect, starting April 5, 2010
  • Borrower’s financial information is processed through HAMP.
  • Applies to 1st Lien Holders (Non-GSE Mortgages)
  • Financial incentives are given to borrowers, investors, and servicers
  • Limits response time from lender
  • Lender waives their right to pursue deficiency judgment
  • Claims made by junior/ subordinate lenders are limited


Requirements

Loan must meet all of the following criteria in order to be eligible:

  • Loan is first mortgage
  • Property must be borrowers primary residence
  • Loan originated before January 1, 2009
  • Borrower is in default or has legitimate cause to be in default in the foreseeable future
  • Unpaid balance is less than or equal to $729,750
  • Total mortgage payment (per month) is more than 31% of borrower’s gross income

Key Components

  • Lender forfeits any rights to deficiency judgment
  • Servicer is required to determine the property value, never charging the borrower in advance
  • May be added to outstanding balance if transaction is not completed
  • Servicer is required to review title, never charging the borrower in advance
  • May be added to outstanding balance if transaction is not completed
  • Servicer is required to inform buyer of deed-in-lieu and short sales as alternatives to avoid foreclosure
  • Servicer may not require a reduction in the real estate commission agreed upon in the listing agreement, as a condition for short sale approval.  However, commission cannot exceed 6% of the contract sales
    price (COULD be negotiated if multiple loans.
  • Property must be listed with a licensed real estate professional. This is a requirement!


Procedures & Deadlines


Servicers are required to consider any HAMP eligible borrower for the HAFA program within 30 days from the date the borrower:

  • Is not able to qualify for trial period plan
  • Is not successful in completing the trial period plan
  • Is in default on HAMP modification because of missing two or more consecutive payments
  • Attempts a short sale or deed-in-lieu
  • Servicer must diligently attempt to inform the borrower, in writing, of the availability line of a deed-in-lieu and short sale
  • The servicer gives the borrower 14 days to contact them and state their interest in these potential solutions.
  • After 14 days, the servicer has no obligation to extend the HAFA offer


Servicer issues two documents:

  • Short Sale Agreement (SSA)
  • Request for Approval of Short Sale (RASS)
  • Servicer will either send the documents proactively or after request of the borrower
  • When SSA is issued the borrower has 14 days from its effective date, to sign and return the document, along with their real estate listing agreement and any
    information about junior/subordinate liens.
  • The borrower or listing broker must send a completed RASS to the servicer within three days following the receipt of an executed offer to purchase
  • Servicers then have 10 days to accept or deny a short sale request (RASS)


Benefits & Incentives

  • Borrowers receive $1,500 for costs associated with relocation; this will be deducted from the gross sale proceeds at closing
  • $1,000 given to servicers for processing and administration fees
  • Servicer cannot charge the borrower for processing fees of any kind and is required to pay all out-of-pocket expenses
  • $1,000 given to investors for junior lien holder payoff
  • Investor is reimbursed one dollar for every three dollars spent to release junior liens up to 3%; this amount is capped at $3,000
  • Depending upon the lender, additional borrower incentives may be available.


Reasons for Cancellation

  • Improvement in borrower’s financial situation
  • Borrower or listing broker does not act in good faith in the listing, marketing, or  closing aspect of the sale
  • Any fraud or misrepresentation in the sale
  • Substantial change in property’s condition or value
  • Bankruptcy is filed for by borrower
  • Any litigation that happens (or is in danger of happening) that would affect title  such as divorce or probate

Copyright 2010 First Coast Realty Associates - Short Sale Specialist Network

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it's a good start, too bad it will affect only 10% of short sales
Agree. Its unfortunate.

I'm actually concerned it will make it even MORE difficult when there's a 2nd or other liens, as it limits things so much.
Yeah, the problem with these "guidelines" is that it leaves so many loopholes to squeeze through. That's never a good thing.
Do the banks contact the homeowners who were denied a loan mod or do they have to initiate contact?
We now have a group that we're going to dedicate to the HAFA short sales program. If we can make it like the Bank of America group or some others, it will be an excellent resource! Check out: http://www.theshortsaleguide.com/group/hafaprogram
Have A $220 thousand mortg. /$2000 per month-- 2 months behind-- person I talked to mentioned not to make the payments and proceed with short sale-- wouldn't I be better off keeping payments current and have co. reduce the price of property to market- and re-issue the loan.. Would like to keep my property but payments are to high- and work has become slower-- my credit is rough--- Please advise.. Thank You, Bruce
Hi there Bruce! Alot depends on your motives and what you want! This site is more for agents, if you get a second check out www.short-sale-specialists.com. That is for the public and would be your best bet for answers.
Hello Bruce -

If you want to keep your home: Call your lender(s) and talk with them - don't scream at or blame them, just talk with them - they may or may not work with you. As a previous Social Worker my heart goes out to everyone who is finding themselves in distressed property situations. I am all for the homeowner fighting to keep their home. The caution here is that if you wait too long to make a decision to proceed with a Short-Sale you may find yourself out-of-time and you will be stuck with a foreclosure. My suggestion would be to find an agent who you can trust to put your best interest above their own pocket book and let them help you sift through the information. Best of luck!
Some lender are being proactive and are begining to contact borrowers who are late on thier payments, to initiate a Loan Mod and if they don't qualify for the loan mod then they offer them the option of a short sale.

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