HAFA Short Sales Cost Treasury Department $4.3M

Based on a Congressional Oversight Panel report, it seems the Treasury Department has already paid out investors and servicers a whopping $4.3M as incentives as part of the Home Affordable Foreclosure Alternative or HAFA program. The said program was launched last April and designed to benefit distressed borrowers who were not able to qualify for the loan modification program.

The HAMP program, meanwhile, was under fire again as it delivered underwhelming figures. The chairman of the COP, Senator Ted Kaufman believes these subprograms under HAMP were not able to put a dent on the foreclosure mess.

In their defense, the Treasury Department pointed out that the incentive program set a standard for future programs, particularly those involving short sale transactions which come with very complicated and lengthy process. In fact, the sellers, buyers and agents involved usually suffer from many delays and other headaches.

In addition, the Treasury Department also believes the success of these programs is not felt immediately since they will still need some time before they are really up and running.

The controversial incentive program involves the Treasury paying $1500 to servicers who will agree to a short sale and as much as $2000 for mortgage investors who will allow a maximum of $6000 from the proceeds to be distributed to secondary lien holders. In addition, Treasury will also pay $3000 to borrowers as relocation assistance.

Based on the said figures and with over $4.3 million spent, the Treasury has actually assisted about 661 short sale transaction in the last eight months. Each short sale roughly costs about $6500. Meanwhile, the Special Inspector General for the Troubled Asset Relief Program has cleared 343 short sales as of September 30.

It is indeed frustrating to see how little the federal government has accomplished in its struggle to put an end to the foreclosure crisis. For many, it is a case of too little, too late and one can only hope the housing market has reached rock bottom in order for true recovery to start.

Reference: http://www.housingwire.com/2010/12/14/panel-finds-treasury-spent-4-3-million-in-hafa-short-sales