So, I sat through a three hour "short sale seminar" taught by Bank of America yesterday, wherein I had hoped to get detailed information on the new Home Affordable Foreclosure Alternatives (HAFA) program - which was implemented April 5th - and the ever-changing short sale process. The presenter however, just kept reiterating in so many words how BOA sucks less now than they used to because they are using a new organizational program for short sales called Equator, meanwhile saying he wasn't going to get into details. SO, I decided to research the details myself so I could bring them to you.
First, using HAFA means the current homeowner does not get to stay in their home. This is different from HAMP, wherein your lender does a payment modification for 3-6 months in order to keep a family in their home during a financial hardship. This is for people who are not able to make a modified payment and who qualify under HAMP to help them avoid foreclosure. Essentially, it speeds up the short sale process tremendously. The bank approves the short sale BEFORE the home goes on the market (for a minimum of 120 days), and even tells the borrower how much it will accept in net proceeds. This eliminates the long 90+ day waiting period on the part of the buyer and seller when a contract is ratified and sent to the bank to see if it will even be accepted. So, the short sale terms are pre-approved BEFORE the home goes on the market. If a borrower makes an effort to sell the property and is not able to, they can return the property to the bank for a deed in lieu of foreclosure. They basically turn over their keys and have 30 days to vacate. In either situation, the bank must fully release the borrower from any financial obligation connected with their first trust mortgage. It also provides $3,000 in moving assistance to borrowers, as well as incentives to investors for negotiating arrangements with second trusts and other lienholders so the property can be sold. The bank may not require the borrower to make any cash contribution or sign a promissory note in connection with the short sale or DIL under HAFA.
In order to qualify for HAMP, and therefore HAFA, you must meet the following requirements:
- Home must be your primary residence
- Balance owed on first mortgage must be less than $729,750
- You have suffered a hardship that makes it difficult to pay your mortgage (i.e. loss of job, increase in mortgage payment, reduction of income, etc.)
- You must have taken out your current mortgage prior to January 1, 2009
- Payment on your first mortgage (PITI) must be more than 31% of your current gross income
11.3 million people in this area have negative equity in their homes, and another 2.3 million have less than 5%. It's easy to see how this could happen even to someone who used conventional financing with a 20% downpayment 5 years ago. Declining values have added to this problem - not just sub-prime lending. If you need help, talk to your lender, a HUD counselor, or a realtor today.
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