The Home Affordable Foreclosure Alternatives program debuted April 5. Lenders have been ramping up for a deluge of Short Sales for the past several months and the government’s latest program will probably boost the numbers even though there are flaws in the program. HAFA may help individuals who qualified for a trial loan modification, but didn’t make the final cut for a permanent loan change. The same paperwork prepared for HAMP will apply to HAFA as well.
Bank of America and other servicers have more than doubled the number of Short Sales they are handling in recent months. There is real recognition now that transacting a Short Sale saves time and money for the Lender.
Under the HAFA program lenders get higher incentives than under the current Home Affordable program. Servicers will get $1500 for handling the Short Sale. Investors holding the note will get $2000 for sharing some of the sale with a second lien-holder. Second mortgage-holders can get up to $6000 for releasing their liens. Homeowners get $3000 to assist in moving expenses.
Lenders under HAFA must expedite BPOs in order to tell homeowners what they are willing to accept for sale of the home. Once the owner has found a buyer the Lender must respond with whether the offer is accepted within 10 days. Under HAFA a Homeowner does not have to have a Buyer lined up before the paperwork is started and the Lender has ordered a BPO. To this point many lenders have required the Buyer to be in place before starting the Short Sale case file.
The Homeowner may be required to continue to pay some portion of the mortgage in order to qualify for the Short Sale program. If the home is not sold within 120 days the Lender may choose to initiate a deed in lieu of foreclosure, or they may choose to extend the deadline for a sale for up to one year. In exchange for putting this level of control in the hands of the Lender, the primary Lender must agree not to pursue a deficiency judgment.
Until the impact of HAFA becomes clearer we recommend that Homeowners request non-HAFA Short Sales. Many Homeowners are unable to continue to pay mortgages while Lenders decide upon a Short Sale. There is the possibility that the Homeowner will pay just to find out that the Short Sale is going to be denied. At that point there may be few options to ask for a new BPO or find a new Buyer.
Dave Rosenmarkle
Broker/Owner
Highland ealty
Arlington, VA 22207
703-538-2566
davidrose@mris.com
www.HighlandAgents.com
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