Supplemental Directive 12-07 initiated a number of changes to the HAFA (Home Affordable Foreclosure Alternatives) short sale program, which will take effect Feb. 1, 2013. HAFA was instituted in 2009 by the U.S. Treasury Department. Along with several changes discussed in previous posts on this subject, the purpose is to further streamline the short sale approval process.
More and more distressed homeowners struggling to pay their mortgage payments are discovering the opportunity to avoid foreclosure by choosing a short sale. If qualified for the HAFA program, the homeowner can avoid any deficiency judgment, continue to live in the property through the entire process until closing, and receive $3,000 at closing for relocation assistance.
One important aspect of this program is the fact that the government will add to the money that the primary lien holder allows a subordinate lien holder to receive from the transaction at closing. With this revision the government contribution to a subordinate lien holder is increased to $5,000, and the total amount that a subordinate lien holder can receive is increased to $8,500. This provides more of an incentive for a second mortgage company which would otherwise get zero in the case of a foreclosure, to receive $8,500 for participating in the approval of a short sale.
Additionally, the waiting period for a buyer of a short sale property to resell the property is reduced from 90 to 30 days. This will help a short sale realtor find a buyer for the property, as the 30 day waiting period is more attractive to investors.
With the implementation of these new guidelines a good short sale specialist realtor who knows what they are doing should be able to assist a distressed homeowner to avoid foreclosure, walk away with some cash in their pocket, and without any concern about being chased down for the deficiency judgment after the closing. Considering the fact that here in Colorado the bank has 6 years after a foreclosure to collect on their losses, this is a great opportunity for a struggling homeowner who is under water on their property.