For starters, if the borrower's servicer offers them participation in a HAFA short sale, they must respond within 14 days or lose the opportunity to participate.
Without getting into all the technical details of HAFA, there are some things I think all borrowers and agents should be aware of to help in determining whether a HAFA short sale is advantageous. I have included a link to the actual HAFA Supplemental Directive 09-09 Revised with this article so you can read the details yourself.
HAFA is the government's latest program to try to get short sales moving. It just went into effect as of April 5th, with major revisions occurring as recently as March 26th. Lenders, servicers, borrowers, investors and real estate agents are all trying to get their arms around HAFA to see what it really means. As agents, we are all wondering to what extent the servicers and investors will actually participate and comply with HAFA. Many of the big Lenders and Servicers have signed up for the program. ( Current List of Loan Servicers Participating in HAFA) :
Among HAFA's features are:
Home must be borrower's principal residence. (There is a 90 day exception for documentable job relocation)
Full release of any further financial liability to the borrower for the first lien. The investor that owns the first mortgage must agree to participation in the HAFA short sale.
Full release of any further financial liability to the borrower for the second lien should they accept the HAFA terms
The second lien holder will also have to agree to participation in the HAFA program. If the second lien holder will not release the lien the sale will not qualify for HAFA, the borrower may still qualify for a "traditional" short sale, however.
It is not clear that second lien holders are going to participate in HAFA sales since it requires a complete release of lien with a capped payment to them of $6,000. In our experience, many second lien holders want or at least will attempt to demand more in the form of cash, continuation of payment or modification of the loan to release the lien to allow a short sale to take place.
The lender will require that the borrower pay them up to 31% of their gross monthly income while the property is marketed and up until closing
If the second lien holder refuses to cooperate, the borrower could wind up having paid additional money to their lender that they will not be able to recover.
The Loan Servicer is required to provide the owner and agents with a price or net for the first lien which is acceptable to the investor and which the agent will use to list the property.
The Loan Servicer is required to approve or decline an offer within 10 business days
There are some other uncertainties which have come up already in our business.
It is not clear how divorced couples would be treated from anything I've read; whether or not a divorced spouse not living in the home would or would not be required to make payments as well or whether the payments to the Servicer would be based on the divorced couples combined incomes.
The seller and their agents are responsible for obtaining the release from the second lien. It is not clear whether or not Servicers such as BOA and Wells Fargo will assist in getting a release from themselves (in a second mortgage situation) or whether or not they will assist in getting a release from a completely unrelated Servicer/Investor. They are not required to assist with getting releases from subordinated lien holders. Traditionally, this has been the responsibility of the Listing Agent and is one of the reasons short sales can be so difficult: getting that second to agree to terms to allow the short sale to go through.
There are of course many more questions to be asked and answered with this program. These are just a few of the considerations that immediately come up when contemplating how home owners and agents should approach this new program.