HAMP(also known as HAFA) stands for Home Affordable Modification Program. HAMP has addressed new rules for short sale transactions that are owned by banks(not Fannie Mae and Freddie Mac). Keep in mind HAMP has been a failure for helping home owners modify their current mortgage, so far. Lets hope this program makes short sale transactions easier. Here are the new rules(guidelines):
- Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
- Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds). This should make life much easier!
- Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).
- Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
- Uses standard processes, documents, and timeframes/deadlines.
- Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).
- Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.
- Requires the bank to respond to all offers within 10 days.
The program does not take effect until April 5, 2010. The program ends on December 31, 2012. Another great piece of information from Dave Your Mortgage Guy. Please call me with any questions.