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