Today, I went to a continuing education class and was given a synopsis of how the HAFA (Home Affordable Foreclosure Alternatives) and HAMP (Home Affordable Modification Program) can work with a short sale. Let me make this statement, I was learning this information today so I am VERY open to comments to help educate me on this topic as well as other readers!! I do know these do NOT apply to Freddie Mac or Fannie Mae loans as they have their own programs.
COMPLIMENTS OF UNIFIED TITLE, FORT COLLINS, CO
What might make this program work (as I understood it) is to help stop the Notice of Election & Demand which starts the foreclosure process. IF THE SELLER realizes he/she WILL BE falling behind in the near future on his/her mortgage, he/she can request the HAMP program. Once he/she does that, and starts the process, he/she can then change it to HAFA stating that he/she can not make any payments due to whatever the hardship is. By doing so this starts the process that could ultimately make a clearer path for the short sale without the looming fear of foreclosure.
Some of the changes through this program are:
- 10 day decision deadline for the mortgage service
- Borrowers to be FULLY released from the debt, deficieny judgments & promissory notes CAN NOT be required by the 1st mortgage
- Sellers may receive up to $3,000 for relocation expenses
- Mortgage servicers may receive up to $1500 for admin/processing costs
- Investors may receive $2,000 for allowing a portion of the proceeds to go to subordinate lien holders
- Realtors commission can be up to 6%
- Standardizes short sale forms & procedures
- lender pays ALL servicing fees
- Expires December 31, 2012 unless extended
In order to do this pocess the loan MUST meet the following criteria:
- Borrower's primary residence (BUT can be vacant a maximum of 90 days provided that it was employer mandated or a new job relocation)
- First lien mortgage originated on or before Jan 1, 2009
- Loan is delinquent or in imminent danger of default
- Current unpaid balance is NO more than $729,750
- The borrowers monthly mortgage payment exceeds 31% of his/her GROSS income
BANK OF AMERICA, CHASE, CITIMORTGAGE, GMAC MORTGAGE, US BANK, WACHOVIA, WELLS FARGO, ETC...are almong the nearly 120 mortgage servicing companies participating.
How the process works:
The Seller must be considered for a loan modification. If the loan modification attempt is UNsuccessful, then the Seller may be considered for a short sale. The short sale process would use the same Borrowers financial and hardship information already collected in the loan modification process. HERE IS THE BEST PART:
If there is NOT yet a purchase offer made, the mortgage servicer and the Borrower enter into a short sale agreement.
- The agreement is valid for at least 120 days and up to one year (giving you time to list the home, market it and hopefully get under contract)
- The agreement provides the marketing terms and listing price.
If there is an EXECUTED purchase offer immediately, the Seller may request a short sale. The Seller must be notified of the availablity of a loan modification but then reject that option.
IF THIS PROGRAM IS AS GOOD AS IT SOUNDS, this could really assist our short sale clients by having them go through this HAMP/HAFA process - even if we know that they may not qualify. Which is sounds to me that its expected that they can not. BUT it stops the looming foreclosure that we race against in a short sale and once that Notice of Election and Demand is filed (per the instructor today), the credit ding is even more severe, plus it sounds like the short sale process is faster and if the BANK is giving you the listing price then I would assume more or less preapproved that short sale..
I WOULD LOVE FEEDBACK ON THIS TOPIC and what your knowledge is on it and how it might work different that what was stated above...
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