According to HAFA (Home Affordable Foreclosure Alternatives) program slated to take effect April 5, 2010, lenders MUST first evaluate/advise homeowners on HAMP (Home Affordable Modification Program) loan modification programs prior to any consideration of eligibility of the HAFA short sale option.
One of the goals of the new HAFA program is to simplify and streamline the use of the short sale option by incorporating the following unique features:
- Uses borrower financial and hardship information already collected in connection with consideration of loan modification.
- Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
- Disallows foreclosure sales during the marketing period specified in the SSA short sale agreement.
- Must pay commissions stated in the listing agreement not to exceed 6% of the contract sales amount.
- REQUIRES BORROWERS TO BE RELEASED FROM FUTURE LIABILITY FOR THE FIRST MORTGAGE DEBT - NO CASH CONTRIBUTION, PROMISSORY NOTE OR DEFICIENCY JUDGMENT IS ALLOWED.
If I understand this correctly, HAFA will consider a stream line short sale approval and process for borrowers who have proven their hardship and financial situation already collected in consideration of a loan modification. I believe that an increasing number of homeowners holding "A"-paper, fixed rate mortgages with adequate earning ability will attempt to participate in the HAFA program due to their negative equity position and desire to move.
Loss of equity is not an acceptable basis for "hardship". If these individuals are declined for HAMP due to an unproven hardship will they also be declined for the HAFA short sale process? I assume so based on the outlined criteria.
That brings me to my point. The government appears to be showing bias towards weaker individuals by allowing them the ability to move from one location to another while eliminating the threat of repayment of the forgiven debt to boot.
The "stronger" individuals I referred to may be forced to remain in their current homes with no ability to move unless they can pay off the full principal balance of their mortgage with no assistance.
Is this a breach of the US Department of Housing and Urban Development (HUD) Fair Housing Act? I believe that the term "hardship" will need to be redefined to enable equal housing opportunities for all.