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Hamp and Hafa Programs in Broward County-UPDATED 4/30

By Rose Mencia

Real Estate Agent with Sundance Realty South Florida Inc.

April 15, 2010 08:47 AM

Hamp and Hafa Programs

I've reviewed the Hamp and Hafa Programs and honestly, they seem tough to use if the homeowner has a 2nd lien ( 2nd mtg.) on the home, or has already moved out, or, is unemployed.

These 3 very COMMON reasons occur in the majority of the short sales I've witnessed or have been involved in. None-the-less, I've posted this information because there are those that MAY benefit and I wouldnt throw any program out the door without reviewing the specifics of my sellers needs.

Now, a little about "Hamp", this program is for loan modifications and generally involves the maximun payments of 31% of the seller's total income before taxes to be paid towards their loan payments. Once these numbers are established, proof of ability to pay must be supported and there is a 3 month test period to see if the owner is able to pay. Dosn't work if un-employed or if foreclosure is eminant, timing is important. If the loan modification fails due to lack of payments during the "test" period, or the buyer is rejected, then you can move into the Hafa Short Sale program. (Its possible to skip the loan program with Hamp, but you must apply to skip it and it must be approved!)

Now, below are a few of the "Goods" and the "Bads" of the Hafa Short Sale program. Its not all that easy easy either.... certainly has alot to consider and every case is different, below are a few key points, positive and negative:

Hamp and Hafa Programs

HAFA: The GOOD News:

1-Homeowners will be released of all responsibility and NO possible ability to reopen or sue for deficiency in the future (YAY). (This is excellent, any short sold loans may still hold homeowners liable for the deficient amount that the lender lost)

2- There is a pre-approved short sale listing along with a minimum sales value ( saves time,making it easier for more buyers to offer/negotiate)

3-Homeowners are given$3000 towards relocation from the lender at closing (an excellent aide to moving for these families) There is a 1099 attached to this also......

4-If the homeowner had attempted a Hamp modification,then many of the same docs and info will be used, reducing the amount of paperwork-(will save TIME)

THE BAD:

1- The property may not be sold to anyone with a close relationship to the owner in default. (No friends, No relatives and may not be rented back to them)

2- The new buyer may not re-sell the property before 90 days after closing.(arms length transactions only!)

3- The difference between the remaining principle that is owed and the amount recvd must be reported to the IRS on form 1099C, as debt forgiveness. In some cases this debt could be taxed as income. The amount paid as moving expenses/relocation ($3000.00) may also be taxed as income. You have to check with the IRS or your tax preparer to confirm.

4- If the owner is a realtor, he cannot list his own short sale listing.

5- The owner must be able to deliver clear,marketable title, free of liens. The program will allow up to 6% of the unpaid principle balance of each jr. lien in order of priority, to be paid at closing- not to exceed $6000.00 total. Each jr lien holder will be required to fully release the owner of any deficiency and personal liability (satisfaction of lien.) This must be negotiated through the homeowner themselves, hopefully with the aide of a savvy realtor. This part is tough, most jr.(2nd liens) will laugh...

***** Therefore, it's recommended that the owner and the realtor determine whether it's possible to pay these 2nd homeloans and how much. The owner may not be able to comply.

5- Last but not least, the homeowner must still be in the property, maintainng it, the possible HOA and Insurances, taxes......... during the entire process. They will pay up to 31% of their monthly gross income during the whole process. ( Pretty rough if your un-employed)

In a NUTSHELL....... every short sale is different, any we can ask the lenders to short sale outside of HAFA.... i'ts another alternative. A little more questionable..... an realtors better be on their game for that>>>

These days.... Upside down owners need to make sure they are on top of the latest information...

STICK to A Knowledgeable REALTOR..................................................