The innocent-looking title of this post is loaded with a whole host of issues related to the sale of distressed properties, and I’m about to briefly explain the directives that the Obama Administration has been sending down the pike, with regard to short sales. Please be advised though that every home owner’s situation is different, therefore, if you are contemplating a short sale of your Edgebrook, Sauganash, or Gladstone Park residence, I would have to have an initial in-depth one-on-one conversation with you to discuss how these changes might apply to your specific situation. Also, you are definitely going to need an attorney, as I am not authorized to provide you with any kind of legal advice.

Home Affordable Modification Program (HAMP)

HAMP has been the Obama Administration’s initiative to help struggling homeowners get relief and avoid foreclosure on their homes. This program aims to help eligible homeowners modify their mortgages. Widely criticized for the program’s underwhelming results, yesterday, the Administration broadened the scope of HAMP, by including unemployed homeowners in the program, and by offering further incentives to lenders and loan servicers.
Aside from that, certain banks have also pledged to reduce mortgage balances for some of their borrowers. Nonetheless, a very large number of homeowners whose homes are “under water”, may not be eligible for a loan modification under HAMP guidelines. In that case, homeowners would have to rely on another program called HAFA which is a part of HAMP. I know, it’s confusing, but bear with me here, because you’re going to need a Realtor who understands the ins-and-outs of all these programs…

Home Affordable Foreclosure Alternatives (HAFA)

First introduced on November 30, 2009, as part of HAMP, the HAFA program offers homeowners, their mortgage servicers, and investors an incentive for completing a short sale or deed-in-lieu of foreclosure. HAFA is overseen by the US Treasury Department, and is administered by Fannie Mae. Homeowners who have short sold their homes already, know full well that in a short sale situation, sellers’ lenders do not allow them to walk away from the closing with any net proceeds whatsoever. Under the new HAFA directives, lenders that participate in the program, must agree not to pursue any deficiency judgment against the short selling homeowner. Let me repeat that: Lenders participating in the HAFA program may not pursue any deficiency judgment against their short-selling borrowers. Folks, this is HUGE, because Illinois happens to be a recourse state. Lenders receive a nominal servicing bonus for participating in the program, and – this is new – short sellers may receive up to $1,500 $3,000 in relocation assistance (moving expenses) following the closing (which may classify as taxable income). The best part of HAFA imho is that upon the receipt of an offer from a buyer, participating lenders MUST respond within 10 (ten) days, accepting or denying the short sale request, the latter of which must have a detailed reason. WOW, no more waiting 3-6 months for an answer from the bank, risking that the buyer walks away from the transaction. However, please keep in mind that this program is brand-new, and in fact doesn’t even go in effect until April 5, 2010. Will there be some hiccups in the beginning, as well as some growing pains? Most likely. Chances are that most of the big lenders like BofA, Chase, Wells Fargo, Citi, GMAC etc. will be HAFA participants. But of course, we won’t know for sure until April 5, 2010, as there is no official list of participating lenders yet. One thing seems to be certain though: Lenders have come to realize that short sales are less costly to them than foreclosures, and are finally starting to put systems and resources in place that can timely and efficiently manage short sales.

Beware of Scams

The housing market crisis has generated a number of scams that many homeowners in distress have been falling prey to. Do not let this happen to you! The federal government specifically warns of foreclosure rescue scams and con artists who request upfront fees to “save” your home, or to lower your mortgage.

Next Step

If you are contemplating a short sale of your property, please contact me at your earliest convenience, to discuss a short sale plan of action for your residence. As a Certified Distressed Property Expert (CDPE), there are a lot more details – over and above what I’ve posted here – that I would need to share with you, in person.

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Addendum: HAFA Q&As

Ever since this post was published, it is receiving a large number of visitors who have found it, mainly by googling “HAFA participants”. Today, there was another interesting Google key phrase that prompted me to set up a “HAFA Q&A”, below. The search phrase was “Is Fannie Mae a HAFA participant”? Without further ado, I’m getting the Q&A ball rolling, right here. If you have any HAFA-related questions, please don’t be shy, just go ahead and ask them in the comments section below. If I don’t have the answer readily available, I will find it for you.

Q: Is Fannie Mae a HAFA participant?

A: No. At this time, the HAFA guidelines set forth by the Treasury Dept., effective April 5, 2010, exclude GSE’s (Government sponsored enterprises), which Fannie Mae and Freddie Mac are. However, my understanding is that these GSE’s are in the process of developing/releasing their own versions of HAFA rather soon.
Update (6/1/2010): Fannie Mae announces its own HAFA program effective August 1, 2010: Fannie Mae Announces its Own Foreclosure Prevention Plan Under HAFA
Update (6/2/2010): Freddie Mac announces its own HAFA program effective August 1, 2010: Freddie Mac Details HAFA Initiative for Distressed Homeowners

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Q: Which banks are HAFA participants?

A: Generally speaking, lenders who participate in the HAFA program, also participate in the HAMP program. The major lenders BofA, Wells Fargo, Chase, GMAC, Citi, and Wachovia are HAFA participants. However, please note that even though these lenders are HAFA participants, they often service loans for other investors who do not participate in the HAFA program. In those instances, your mortgage would not qualify for a HAFA short sale, and would have to be processed as a traditional short sale transaction, without all the benefits of a HAFA short sale.

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Q: Who is eligible for HAFA?

A: Please see here.

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MARS Disclaimer

RE/MAX International, RE/MAX Cityview, and Markus Azadeh assume no responsibility nor guarantee the accuracy of this information, and are not engaged in the practice of law, nor provide legal advice. It is strongly recommended that you seek appropriate professional counsel regarding your rights as a homeowner. RE/MAX International, RE/MAX Cityview, and Markus Azadeh are not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.

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Image attribution: Making Home Affordable logo by US Treasury, Fannie Mae
Post thumbnail image courtesy of:

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Tags: Real Estate, Short Sale