The government introduced the Making Home Affordable Plan (HAMP) as part of the financial bailout. The intent of the plan was to facilitate loan modifications to help people stay in their homes. Despite the best intentions, the plan didn't work as the housing crisis deepened. It quickly became apparent that more comprehensive action needed to be taken.
The natural outgrowth of the loan modification plan was the Home Affordable Foreclosure Alternative (HAFA) plan. It was intended for people whose loan modification - for whatever reason - did not work! The intent of the plan is to help homeowners either sell their home through a short sale, or complete a Deed-in-Lieu of foreclosure.
Short Sales have been around in our area for quite a while, but there has been no uniform standard applied. In fact, it could be argued that complete chaos reigns supreme in the short sale market. The Punta Gorda - Port Charlotte - North Port areas are no exception when it comes to short sale confusion.
The government plan streamlines the short sale process and creates incentives for borrowers and their banks to participate. Homeowners in the Punta Gorda - Port Charlotte - North Port areas can benefit by participating in the HAFA program as follows.
- The homeowner applies to enter the plan before marketing the home. Previously a homeowner could list the home for a short sale, and the bank would only find out when they were presented with an offer.
- The bank establishes a price for the home. Prior to HAFA, a short sale home was offered at whatever a home-owner and their agent conjured up.
- The homeowner is given a time frame in which to sell the house. This is typically 120 days, but it can be extended for up to a year. During this period, the banks undertake NOT to foreclose on the home. Prior to HAFA, a foreclosure could derail the short sale at any point, right up to closing.
- An incentive is paid to the homeowner. The treasury will pay the homeowner $3,000 to assist in relocation AT CLOSING!
- Incentives are also paid to the servicer of the loan, and minimum payoffs are established for second liens. Prior to the HAFA plan many servicer's dragged out the short sale process because they were being paid by the banks and investors a monthly fee. Second and third lien holders were often left out of the equation and consequently they weren't always cooperative in agreeing to a short sale.
- The banks undertake NOT to pursue the homeowner for any deficiency created by forgiveness of the mortgage debt. Prior to the HAFA plan, homeowners had to rely on the lenders goodwill, and hope for the best. This is one of the most significant aspects of the plan!
The government also established criteria for whom they would offer this assistance to:
- The property is the borrowers primary residence.
- The property is occupied. Some consideration is given for borrowers who had to move for employment considerations.
- The borrower participated in the HAMP Loan Modification plan. However, this does not exclude homeowners who didn't participate, it merely channels homeowners through the HAMP plan.
- The mortgage was originated before January 1, 2009.
- The loan balance does not exceed $729,750.
- The mortgage payment exceeds 31% of the borrowers gross monthly income.
- Investors are not eligible for HAFA
Homeowners should also be aware of some changes to the plan which benefit the bank.
- Should the short sale not be completed in the allocated period, the homeowner is bound to proceed with the Deed-in-lieu of foreclosure.
- The banks may charge the homeowner 'rent' to stay in the home for the duration of the short sale period. The stated hardship may affect or even negate this requirement. Prior to HAFA, many homeowners were living rent-free for months - or even years - as the short sale progressed. This aspect of the plan does place some responsibility on the homeowner to provide for their own shelter.
The HAFA plan is certainly a step in the right direction in bringing some order to the somewhat chaotic short sale process which has been bedeviling the housing industry for the last couple of years. There are certainly more aspects to HAFA than we've addressed here, and Fannie Mae and Freddie Mac have established their own versions of HAFA. Currently there are well over 100 banks participating in the HAFA plan.
As always, the best advice for homeowners in these turbulent times is to seek out qualified and competent help. We have been involved in dozens of Punta Gorda - Port Charlotte - North Port short sales over the last few years and have sought Certification as HAFA Short Sale Specialists. We look forward to assisting you. If you'd like us to evaluate your situation as to whether you'd be a good candidate for the HAFA plan, please visit our HAFA Short Sale Website.
Deep Creek Realty is not associated with the government, and our service is not approved by the government or your lender; and
Even if you accept this offer and use our service, your lender may not agree to change your loan; and
If you stop paying your mortgage, you could lose your home and damage your credit rating.