Wednesday, November 28, 2012

Treasury streamlines HAFA Short Sale Program

The U.S. Treasury Dept. this week announced new guidelines to streamline and standardize the HAFA Short Sale Program, which provides a $3,000 relocation incentive for qualified homeowners.
Among the changes, Treasury’s Supplemental Directive 12-07 to the Making Home Affordable Program shortened the decision timeline to “essentially 30 days,” in line with new Fannie Mae and Freddie Mac short sale rules, and will not require financial documentation from some distressed homeowners.
Major changes to the HAFA program include:
PRE-DETERMINED HARDSHIP: Borrowers with 90-plus-day delinquencies and a FICO score below 620 will be classified as having a “pre-determined hardship” with less required documentation.
Homeowners who meet the criteria will only need to complete a Hardship Affidavit to be considered for HAFA approval. The current Request for Mortgage Assistance (RMA) form qualifies as a Hardship Affidavit, Treasury says.
QUICKER ANSWERS: Servicers now have essentially 30 days to approve, reject or counter a HAFA short sale offer.
For pre-approved HAFA short sales, in which the applicant has been prequalified for the program:
If an offer meets the minimum price and terms of a pre-approved HAFA short sale, the servicer must issue the approval within 10 business days of receiving the offer. Offers less than the pre-approved terms must be acknowledged with an approval, rejection or intent to counter-offer within 10 business days of receipt, and the counter-offer must be generated within 30 calendar days.
Servicers can accept lower offers “so long as the proposed sale is in the best interests of the Investor,” according to the MHA guidelines.
For offers sent without a pre-approval:
The bank must acknowledge receipt of a complete offer within 10 business days. If the seller is more than 90 days delinquent on their mortgage and has a credit score less than 620, the servicer must issue a short sale approval, rejection or counter-offer within 30 calendar days.
For borrowers who are not three months behind and/or have credit scores above 620, the 30-day clock doesn’t start until the servicer receives a Hardship Affidavit completed by the seller and the buyer.
In either case, the servicer can extend the 30-day window but must give written updates every 15 days until it reaches a resolution.
EVERYONE SIGNS OFF: The buyer in a HAFA short sale will now be required to sign a new Hardship Affidavit in which they affirm that the sale is an “arm’s-length transaction” and they are not giving the seller any compensation.
Previously, only the seller and real estate agents were required to acknowledge the arm’s-length requirement.
LENDER BENEFIT: Treasury has increased the reimbursement to the lender for permitting part of the sale proceeds to pay junior lienholders, making the program more attractive for the banks.
For HAFA short sales closed on or after Dec. 1, 2012, the first-mortgage lienholder will be reimbursed up to $5,000 of the $8,500 that it allows to a junior lien, such as a home equity line of credit or other second mortgage.
That amount increases from the previous maximum of $2,000.
SHORT SALE LEASE-BACK:  supplemental directive adds the following specific language to the Making Home Affordable handbook: “The terms of any sale approved by the servicer that provides an option for the property to be sold to a non-profit organization with the stated purpose that the property will be rented or sold to the borrower.”
In March 2011, Treasury first referred to this groundbreaking initiative in Supplement Directive 11-02, which introduced the concept to servicers. Servicers subsequently did nothing to implement the option in their HAFA guidelines.
Other companies inspired by Treasury’s foresight recently launched programs in California. (Do you qualify for the new Short Sale Lease-Back Program? Call 951-778-9700 today for an interview.)
Supplement Directive 12-07 now may open the door a bit further for this type of short sale.
INVESTOR PURCHASES: HAFA currently prohibits a buyer form reselling a home within 90 days of the HAFA transaction. That time restriction has been shortened to 30 days, though a resale for 20 percent more than the previous purchase price would have to wait at least 90 days.
The new short sale rules — which do not apply to loans owned or backed by Fannie Mae, Freddie Mac, the Veterans Administration (VA), the Dept. of Agriculture’s Rural Housing Service or the Federal Housing Administration (FHA) — kick in Feb. 1, 2013, though servicers can implement them immediately. A short sale occurs when a home is sold for less than is owed on it and the bank discounts the payoff.
The HAFA Program earlier this year was extended through the end of 2013. HAFA requests must be submitted to a servicer by Dec. 31, 2013, and the transaction must be closed on or before Sept. 30, 2014.
Do you qualify for the New HAFA Short Sale program?
Find out now by emailing Anna Mikaelyan, Certified Short Sale Consultant, directly at

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