Lenders prefer short sales and offer HAFA to help

Most homeowners and investors are not aware of what  constitutes a financial hardship, that lenders are approving short sales and deficiencies are being negotiated away.

Lenders WANT TO AVOID foreclosures, but the numbers need to make sense with short sales.

Home Affordable Foreclosure Alternatives Program (HAFA)

Pondering on the decision whether or not to short sale? You may qualify for HAFA. In 2009, the Treasury Department introduced the HAFA program to provide a viable option for homeowners who are unable to keep their homes through the existing Home Affordable Modification Program (HAMP). The HAFA program took effect on April 5, 2010 and sunsets on December 31, 2012.

HAFA Provisions

• Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
• Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
• Uses standard processes, documents, and timeframes/deadlines.
• Provides the following financial incentives:
  • $3,000 for borrower relocation assistance;
  • $1,500 for servicers to cover administrative and processing costs;
  • Up to $2,000 for investors who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a one-for-three matching basis.

Following is a recap of a broadcast with Bob Hora Senior VP, Mortgage Servicing Executive at Bank of America Home Loans. Although it’s Bank of America (BOA) , I believe many lenders have the same perspective:

1. BOA prefers short sales and wants to provide service to Realtors to help homeowners and investors.

2. BOA is sending owners information stating they will provide help with short sales

3. BOA is improving the process using Equator, the automated system that processes and tracks short sales

4. Bob Hora SVP, Mortgage Servicing Executive at BOA Home Loans, says  if you have a problem, let your Realtor know, they have resources at BOA

5. Despite what attorney’s say, Deed in Lieu, is considered, “there is NO other solution” BOA wants  you see you have exhausted a short sales option.  Lenders do not want more foreclosures nor do they want  to carry empty houses

6. Lenders are dealing with back end investors who have a say so, with approving short sales.

7. BOA  transactions that are  priced to market value and conditions,  expedite the process of short sales approvals.

8. BOA will work with back up offers when there is a fall out with a transaction, without starting the process over.

9. BOA plans to increase short sales transactions next year by 60 – 70%.

10. BOA is working on providing shorts sales relocation assistance to owners in the hardest hit states.

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