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Short Sales Guideline issued by Treasury Department

03 Dec
 
The National Association of Realtors provided the following abreviated analysis of the recent update for the Making home Affordable HAMP & associated HAFA Programs.
 
These guidelines will not be mandatory until April, but this gives us a good idea of the direction the government is going with the Short Sale process offering incentives to make this option more attractive to all parties. Obviously they prefer to have Short Sales rather than bank and HUD owned foreclosures.
 
On November 30, 2009 the Treasury department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA). HAFA is part of the Home Affordable Modification Program (HAMP). HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks. HAFA is a complex program, with 43 pages of guidelines and forms, designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure.

HAFA:

Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.

Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.

Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).

Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).

Uses standard processes, documents, and timeframes/deadlines.

Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).

The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements.

The program sunsets on December 31, 2012.

Press Release, HAMP Update-New Program Offers Borrowers Foreclosure Alternatives https://www.hmpadmin.com/portal/docs/news/hampupdate113009.pdf

Supplemental Directive 09-09, Introduction of Home Affordable Foreclosure Alternatives-Short Sale and Deed-in-Lieu of Foreclosure https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf
 
 
 
 

 

 

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Posted by on December 3, 2009 in Short Sales

 

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