As part of the Making Homes Affordable program (HAMP), the new Home Affordable Foreclosure Alternatives Program (HAFA) goes into effect April 5th. The National Association of Realtors has the summary of this at www.realtor.org/shortsales. Under the new program, if a borrower meets the eligibility requirements, they would not have to face a deficiency judgment and would get some cash to move.
Will it work? I'm hoping so, but have my reservations. HAMP was a noble proposal for those who wanted to keep their homes, but, due to unforeseen circumstances, were struggling to make their mortgage payments. But if you've talked with anyone who has tried to get a loan modification, it is a frustrating and often painful process. One person I know has re-submitted their application and supporting documents three times. The typical loan modification process can take up to six months before an answer is forthcoming. The idea was to offer relief BEFORE a borrower was in default, but that is a rare occurrence. The program was left in the hands of the lenders to execute and the lenders were and still are ill-equipped to handle it.
Now the government is asking these same lenders to have their loss mitigation departments learn something new called HAFA to deal with short sales...something that, for the most part, the lenders are not dealing with well now. Although it goes in effect in two days, my sense is that it will take a while to even be known by the loss mitigation departments, let alone executed.
With short sales, each situation is different. A FHA short sale differs from a Fannie Mae short sale which differs from a short sale with a first and second lienholder. They are complicated, time consuming, frustrating and, at times, heartbreaking. HAFA is a ray of sunshine for those wanting to avoid foreclosure but must sell their home. I'm hoping it will help make short sales take less time to conclude.
If you are considering a short sale, it is in your best interest to work with someone who knows what they are doing. NAR has a new designation: SFR which stands for Short Sale and Foreclosure Resource. The Realtors who have this designation have been trained to do short sales and to give advice regarding alternatives to foreclosure. There is also another designation: CDPE which stands for Certified Distressed Property Expert.