Many economists are saying this is the year real estate will finally turn around: Sales will be increasing, prices will be stabilizing and conditions will be generally improving. Unfortunately, foreclosures and other distressed properties will still make up a larger-than-desired portion of our market. The government has made some important changes to the Treasury version of HAFA (Homeowners Affordable Foreclosure Program), effective on February 1, they hope to reduce this distressed property inventory and speed up the recovery of our market. This program was designed to help homeowners who owe more money on their homes than they are worth. Rather than allowing the property to go into foreclosure, many homeowners will try to sell their home through a short sale.
Due to short sales being notoriously long and difficult to get approved, HAFA was developed to help streamline these sales. Unfortunately, this program has seen limited success due to the intricacies of the mortgage process and the stringent qualification requirements. The government will implement some updates, effective February 1.
Some of these changes include: 1) MONTHLY GROSS INCOME - the homeowner is no longer required to verify that their mortgage payment is 31% or more of their monthly income. Although, evidence of hardship is still required, this elimination will allow more homeowners to participate in HAFA. This means that a borrower’s reason for relocation no longer needs to be connected to employment nor be of a certain distance from the property.
2) VACANT PROPERTY - A homeowner no longer required to be living in the home to qualify for HAFA. Now properties that have been vacant or rented for up to 12 months are now eligible for the Treasurey version of HAFA.
3) SUBORDINATE LIENS - Under these new changes, the first mortgage holder is allowed to pay subordinate lien holders (such as multiple morgages or other unpaid debt liens), up to $6,000 to release their liens. Previously the limit was 6%.
4) TIME FRAMES - Borrowers are now required to determine a borrower's eligiblity within 30 days of the borrowers's expression of interest in the program. Servicers are also required to give an approval, disapproval or counter offer no later than 30 calendar days after receiving a sales contract.
While we won't know if these new program changes will make the short sale process smoother and less complicated for a few months, but the government has made a step in the right direction.
Restrictions to qualify for HAFA still apply. Call us for more details.