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Category Archives: HAFA 2013 Overhaul-series

2013 HAFA Short Sale Overhaul – Hardship Affidavit

Supplemental Directive 12-07

Treatment of the Hardship Affidavit is another significant change to the HAFA (Home Affordable Foreclosure Alternatives) Short Sale Program, administered by Laurie Maggiano’s office of the US Treasury Department. As mentioned in prior posts related to this topic, the average time for short sale approval has been reduced from 14 months to 4 months since the original version of HAFA was introduced. Revisions like this one are designed to reduce approval times even more.

Affidavit of Hardship Before and After:

Before Feb 1, 2013 – the Hardship Affidavit had to be completed prior to Short Sale Approval.
After Feb 1, 2013 – a Pre-determined Hardship is adequate for approval and the Hardship
Affidavit can be signed at the Closing.

Requirements: If a Borrower is 90 days or more delinquent on their mortgage and have a FICO score below 620 it is a Pre-determined Hardship. They can obtain short sale approval and the Hardship Affidavit can be completed at closing. If a borrower does not meet these requirements they must complete the Hardship Affidavit before applying for a HAFA Short Sale.

*A Borrower does not have to be delinquent to have a hardship.

The Hardship Affidavit is a three Page form
Find these forms at www.hmpadmin.com/

Seller must explain:

1. Nature of Hardship (reduction in income, increased expenses, increased debt obligations, unemployment, depleted cash reserves, etc.) and explanation
2. Desire to keep or sell property
3. Whether property is owner or tenant occupied
4. How many properties owned
5. Have they declared bankruptcy
6. If there has been a HAMP modification on the mortgage, permanent or trial

Buyer and Seller must affirm 6 points:

1. Sale is Arm’s Length Transaction
2. All agreements, understandings, contracts or offer relating to sale have been disclosed to the servicer
3. Unless disclosed to the servicer, no agreement exists that seller will remain in the property as a tenant or later obtain title to property
4. Neither party will receive funds or commissions from the sale except relocation assistance as recorded on HUD-1
5. All amounts paid to anyone in connection with the short sale are reflected on the HUD-1
6. Anyone receiving relocation assistance is required to vacate the property as a condition of the sale. Seller also affirms that recipient of assistance occupies the property as a principle residence

With this new change after Feb 1, 2013, upon receipt of a request for a HAFA short sale a Servicer can either issue an SSN or accept the purchase contract and issue an acknowledgement of the short sale. In cases where there is a pre-determined hardship this will save time for the step of having the Hardship Affidavit completed by the borrowers, received, uploaded, reviewed and acknowledged by the servicer, before the next steps in the approval process can go forward. For more info about your eligibility for this and other great programs to avoid foreclosure and potentially even receive $3,000 or more in relocation benefits at the closing, contact us or another experienced Short Sale Realtor who specializes in Short Sales and Foreclosure Avoidance.

More examples of revisions designed to reduce Short Sale Approval times will be discussed in future posts. Post 4 of 5 on this subject

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HAFA Overhaul 2013 – Reduced Number of Forms

The US Treasury Department’s original purpose initiating the HAFA (Home Affordable Foreclosure Alternative) Program was to develop guidelines for a single Short Sale Program for lenders, investors, and their servicers to use in assisting Borrowers with a Hardship to Avoid Foreclosure. One of the objectives was to provide a template for a True Preapproved Short Sale. The idea was to reduce the time for a new offer on a Short Sale listed property to be approved, thus reducing the likelihood of having the Buyers get tired of waiting on the approval process and walking from the transaction prior to Short Sale approval.

Prior to HAFA the average time for Short Sale Approval among lenders was 14 months. Now, after the implementation of HAFA the average time for approval is 4 months. Once these new changes are implemented on Feb. 1, 2013, the time for the Short Sale Approval process should improve even more.

One element of the HAFA overhaul is a reduced number of forms:

Old Forms (Before Feb 1, 2013)

  • SSA – Short Sale Agreement
  • RASS – Request for Approval of Short Sale
  • Alt. RASS – Alternative Request for Approval of Short Sale
  • DIL – Deed-in-Lieu Agreement

New forms

  • SSN-Short Sale Notice
  • ARSS-Acknowledgement for Request of Short Sale

*Find these forms at www.hmpadmin.com/

NOTE: Until Feb 1, 2013 use old forms

For example, the new Short Sale Notice form no longer requires the Borrower to sign and return the acknowledgement form before the process can move forward. They estimate this one change will save 2 or 3 weeks in the process. The old process required a notice explaining the terms of the Short Sale program to be sent to the Borrower. After review the borrower had to sign acknowledging they received the information and agreeing to the terms. Then it had to be delivered to the servicer. The document needed to be uploaded by the servicer and then however long it takes for someone to get around to reviewing the signed document. All this before the next step in the process could be done. Under the new revised guidelines, the borrower can sign the acknowledgement at closing eliminating 2 – 3 weeks for the previous process.

More examples of revisions designed to reduce Short Sale Approval times will be discussed in future Posts. Post 3 of 5 on this subject.

 

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GSE’s now agree to implement HAFA

Originally when the HAFA program was initiated by the Obama administration via the U.S. Treasury Department, the  GSE’s (Fannie Mae and Freddie Mac) refused to participate. This seemed a little strange to most of us involved in the Short Sale industry since the GSE’s are considered by most to be quasi government organizations and pretty much controlled by the government. Not to mention they control over 50 % of all mortgage activity. They have now agreed to implement HAFA with some revisions and compromises by the Treasury Department to simplify the process, but keeping the following important elements:

  1. Release of Borrower Liability – A borrower who is approved for a Short Sale under the HAFA program will not owe the amount of the loan(s) which is not recovered by the sale of the home. The borrower, therefore, will not be saddled with a Deficiencey judgement which could be collected by the investor after closing. This is a Huge benefit to Distressed Homeowners since there is an automatic Deficiency and potential Deficiency Judgement on any property which goes to Foreclosure Auction for less than the full amount owed on the property. In Colorado the investor has up to 6 years after Foreclosure Auction to pursue collection. One Very good reason to attempt a Short Sale rather than just let the property go to Foreclosure Auction.
  2. No dual tracking – The Servicer on the mortgage is not allowed to begin a Short Sale process and then Foreclose on the property in the middle of the process.
  3. One point of contact – The Servicing company on the mortgage must assign a single point of contact for the file so there is one person who is familiar with the file and can answer questions, give updates, and potentially assist in getting things moving forward when a log jam or problem occurs.
  4. Caps on subordinate lien payoffs – Having a cap on the amount a subordinate lien holder can receive from the transaction helps prevent situations where the Short Sale process cannot move forward to approval because of an unreasonable 2nd or 3rd lien holder insisting on getting more from the transaction than the first position lien holder is willing to allow. In many cases the junior lien holders would get zero if the property went to Foreclosure auction so it is a better situation for them to agree to the Short Sale plus the Treasury Department adds an incentive for them to play ball.
  5. Simplified documentation – The GSE’s insisted on a more simplified process with less documentation required. For example some documents required a signature from the borrower to acknowledge that they understand the terms of the process before the process could continue to the next step. This was an unnecessary step which could be incorporated later in the process and was easily holding things up for an additional 2 or 3 weeks.

I will go into more detail about this in a future post on this subject. Post 2 of 5 on this subject.

 

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HAFA Overhaul 2013

The treasury department has initiated another overhaul of the HAMP (Making Home Affordable Program) which includes changes to the HAFA (Home Affordable Foreclosure Alternative) Program. This is the part of the program that oversees Short Sales as an alternative to Foreclosure. HAFA is the government initiated program that allows a distressed Homeowner who qualifies to receive a $3,000 Relocation Incentive as well as guaranteed relief from any deficiency judgement for the amount that the lender loses in the Short Sale process.

Under the new guidelines which officially begin Feb. 1, 2013 there will be a more simple process and less documentation required. This should result in more successful Short Sales closing in a Shorter period of time.For more of the specifics or for assistance with a Short Sale contact an experienced Short Sale Specialist Realtor. Here is a Summary of a few of the Before and After comparisons.

HAFA Changes   Supplemental Directive 12-­‐07

Before Feb. 1, 2013

  • Use of SSA (Short Sale Agreement) and RASS Request for Short Sale Approval documents mandatory
  • Servicers required to respond within 45 days
  • Affidavit of borrower hardship required for approval of HAFA short sale
  • The arms length transaction or HUD-1 affidavit required
  • Treasury contribution to subordinate lien payoff $2,000
  • No resale before 90 days

After Feb. 1, 2013

  • Use of Short Sale Agreement and Request for Short Sale Approval documents optional
  • Servicers required to respond within 30 days
  • Pre‐determined hardship (90 plus days delinquent and FICO below 620) with affidavit required
  • New Short Sale Affidavit to be completed at closing
  • Treasury contribution to subordinate lien pay off increased – up to $5,000
  • Resale after 30 days allowed

More info about HAFA changes to come in future posts. Post 1 of 5 on this subject.

 

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