Short sales in Burbank, Studio City and the east San Fernando Valley: new HAFA program details

I've just posted details about the new Home Affordable Foreclosure Alternative (HAFA) program on my website's short sale page. Here's a slightly edited version:


The new HAFA program revamps the short sale market.  In 2009, the Treasury Department introduced the HAFA program to provide a viable short sale option for homeowners who are unable to keep their homes through loan modification -- the Home Affordable Modification Program (HAMP). The goal is to reduce the number of foreclosures by incentivizing banks to pursue short sales instead of foreclosures. And yes, the devil will be in the details.

Here are some of the differences between HAFA and the way short sales have been previously handled by lenders and borrowers.

• Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.  A borrower will no longer have to submit a second package if they have already submitted a complete first package.
• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).  This is huge for both the borrower and the real estate agent as we’ll now know the minimum the bank will accept.
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
• Uses standardized documents, processes and timeframes/deadlines.  There should be no difference now between the way, say, BofA handles a short sale as versus Wells Fargo.
• Mortgage servicers are required to make a preliminary decision regarding allowing the short sale within 15 days of receiving a borrower’s completed package!  We’ll see if the lenders institute enough internal procedures to guarantee that this holds up.
• Provides the following financial incentives:

• $3,000 for borrower relocation assistance;
• $1,500 for servicers to cover administrative and processing costs;
• Up to $2,000 for investors who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a one-for-three matching basis.  In other words, the Treasury will match one dollar to each two dollars the first mortgagor gives the second mortgagor, up to $6,000.  However, 2^nd mortgages are still “the elephant in the room.”
• Requires loan servicers participating in HAMP (the loan modification program) to implement HAFA in accordance with their own policy and investor guidelines. (Remember, the lender’s main concern is not the borrower.  It is the lender’s investor.) What constitutes investor guidelines? It includes factors like total potential loss, local market conditions, timing of foreclosure actions, etc.

Here are a couple of links that you may find useful:

www.makinghomeaffordable.com/contact_servicer.html.
Home Affordable Foreclosures Alternatives Program: Guidelines and Forms 

New "HAFA" short sale conditions

"HAFA" stands for Home Affordability Foreclosure Alternatives and it's the latest set of short sale rules to come along.  These will be implemented by most loan servicers on August 1, 2010.  We Realtors have been strongly encouraged by our brokerage management to get up to speed on the new rules.  I'm currently on module six of an eight-module webinar.  So far, it certainly looks like the devil with be in the details, but here are two things I know now:

• Paperwork and timelines will be standardized;
• The short sale process will be shorter.

I'll have more info as I become more educated.  I'll also be updating my Short Sale and Foreclosure page on my website very soon.

Short sales, Fannie Mae and HAFA

Fannie Mae's New HAFA Program

As you may have heard, by August 1, 2010 Fannie Mae and Freddie Mac, the formerly Home Affordable Foreclosure Alternatives Program (HAFA) exempt mortgage giants, are set to implement their own HAFA programs. For borrowers who are eligible for the Home Affordable Modification Program (HAMP) but were unable to secure a Loan Modification on their Fannie or Freddie loan, this is potentially promising news.
Today we’ll examine Fannie’s recently released HAFA Program Summary. Their stated goal with joining the program is to provide financial incentives for and simplify the process of short sales and deed-in-lieu (DIL) options in the face of foreclosure. For the most part, the Fannie version is in line with the wider HAFA program which includes the following:

• Any borrower who wishes to utilize the new program must have already been evaluated for HAMP, which gives them more options in the event of an unsuccessful evaluation and also removes the need for further eligibility investigation as the HAFA program will use the HAMP documentation. In addition, the program standardizes the steps, documents, and timeframes of short sale or DIL approval;
• Before the property is even listed, the borrower will be able to get pre-approved short sale terms;
• The servicer cannot condition their approval of a short sale on a reduction of the real estate commission outlined in the listing agreement;
• Fannie will release those who are successful in a HAFA short sale from future liability for the debt, and;
• Servicer and borrower will be entitled to certain incentives:
• Servicers will receive a $2,200 fee for a short sale, or a $1,500 fee for DIL
• Borrowers will receive $3,000 to assist with relocation expenses

Fannie’s documents and a full Program outline can be found at their website. Given the amount of foreclosures Fannie has been aggressively pursuing across the country (even being known to refuse to postpone a trustee’s sale with a viable short sale offer before them), one might be forgiven for questioning the sincerity of their commitment to providing foreclosure alternatives.

What does all this mean? I will be obtaining a HAFA certification through California Association of Realtors soon and I'll let you know then.  Thanks, Activerain, for providing this blog post.