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New Government Short-Sale Program Starts Monday

Posted by Benjamin Dona on Thursday, April 1st, 2010 at 11:20am.

New HAFA Short Sale ProgramStarting April 5th the federal government will begin offering financial incentives to hasten the short-sale process for eligible homeowners as part of the Home Affordable Foreclosure Alternatives (HAFA) program. Under the new guidelines, lenders and owners are provided incentives that will help them take advantage of either the short-sale process, whereas the borrower and the mortgage lender agree to sell the home for less than the value of the loan; or a deed-in-lieu of foreclosure, whereas the homeowner voluntarily gives the deed of the property back to the lender.

In simpler terms, HAFA is designed to help people quickly sell their homes by giving them pre-approved short sales terms before listing the property for sale. Lenders will seek a BPO or appraisal before the property is listed and then let the homeowner know the price they are willing to accept as a short sale. And, if the owner can bring a buyer with an above asking price offer, the lender must accept it within 10 business days.

Incentives will include fully releasing the homeowner from future liability for the "first"  mortgage debt and $1,500 - $3,000 for borrower relocation assistance. Lenders can receive $1,000 to help with their administrative and processing costs and servicers/investors can get up to $1,000 for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate "second" lien holders. Lenders will set monthly mortgage payments during the homes marketing period. The payment cannot exceed 31% of the borrower's gross monthly income.

To qualify, homeowners must meet the following criteria:

  • Your home must be your primary residence and it must have been purchased prior to January 1, 2009.
  • The amount of the outstanding "first" mortgage cannot exceed $729,750. (Do not include any outstanding subordinate mortgages).
  • You must have been previously considered for other HAMP foreclosure prevention options including loan modification.
  • Your monthly payment on your "first"  mortgage (including principal, interest, taxes, insurance and homeowner's association dues) must be more than 31% of your current gross income.
  • You will have to provide documentation proving financial hardship.

If you are interested in applying for the HAFA short sale program, you should first determine whether or not you meet the qualifications. If so, you should next decide whether or not you are ready to take on the adverse effects that the program will do to your personal credit. Although the program is not as bad as a foreclosure, it will lower your credit score and will show up on your credit report.

The program is currently set to expire on December 31, 2012. For more detailed information, contact your current "first"  mortgage lender.

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About the Author

Gulf Coast Associates, RealtorsBenjamin Dona is the Broker and Owner of Gulf Coast Associates, Realtors in Bonita Springs, Florida. He holds two advanced degrees, an MBA and an MA, and has an extensive background in both business and marketing. In 1998, he founded Gulf Coast Associates, and formed a group of like-minded Realtor® associates dedicated to offering professional Southwest Florida real estate services by concentrating on information, education and the use of leading edge technologies. He also is a recognized expert on the "Net," a much-quoted and read blog author, and a contributor to both national and international news outlets. Benjamin is a member of the National Association of Realtors, the Florida Association of Realtors, and numerous local real estate boards throughout Southwest Florida.

Contact Benjamin Dona at 239-948-3955



10 Responses to "New Government Short-Sale Program Starts Monday"

Lisa In Logan Uath wrote:
I don't know how well this is going to work but at least someone knows the process is absolutely ridiculous in it's current state. I hope BoA can get their **** together, they are the worst!! Sorry, I just got off the phone with one of my short sale contacts at Wells Fargo, and the difference between them and BoA is night and day.

Posted on Friday, April 2nd, 2010 at 2:56pm.

Benjamin wrote:
It won't help much here because of all the second homes.

Imagaine what we go through trying to get them done.

Posted on Friday, April 2nd, 2010 at 8:05pm.

Charles wrote:
It certainly can't hurt. We'll see how many people will actually qualify.

Posted on Saturday, April 3rd, 2010 at 3:37pm.

Ki in Austin wrote:
So, the government is providing banks money to basically do their job effectively. I feel like BoA needs to go out of business. They are horribly run.

Posted on Tuesday, April 6th, 2010 at 2:50am.

Benjamin wrote:
I'll second that notion about BOA!

Posted on Tuesday, April 6th, 2010 at 10:52am.

Julie wrote:
Does anyone know if this program will help someone who is already in the process of a short sale (and waiting, waiting, waitng for Chase to respond)?

Posted on Tuesday, April 6th, 2010 at 2:45pm.

Patsy Snyder wrote:
At least the homes will have a price approval by the bank before they hit the market. This will save us a lot of grief.

Posted on Friday, April 9th, 2010 at 7:06pm.

Benjamin wrote:
@Julie

We've had one change in process with EMC. Got an email with the approved price on Thursday.

Can you believe they actually contacted us first about the change.

Now, if I would just see the same type of thing out of one of the big banks, I might become a believer.

Posted on Saturday, April 10th, 2010 at 1:42pm.

Benjamin wrote:
@Patsy

Anything that helps get the short sales moving will be an improvement. We struggle mightily here because most are second homes and the banks really aren't as motivated on these types of properties.

Posted on Saturday, April 10th, 2010 at 1:44pm.

Doug in Myrtle Beach wrote:
Great blog. This is a problem that we may have to live with for some time, if only we could wipe these things out and get on with doing what we do best, enrich peoples lives.

Posted on Tuesday, April 13th, 2010 at 9:57pm.



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