| If you work in the Real Estate industry and have | | | | first lien holders must allow up to $6,000 of the |
| a pulse, you are fully aware that the majority of | | | | short sale proceeds to be used to satisfy the |
| transactions today are those classified as | | | | subordinate lien holders, but no more than 6% of |
| distressed properties. Distressed properties are | | | | the proceeds for each lien. |
| bundled together, comprised of short sales and | | | | The time frame to approve the short sale in this |
| bank owned homes. Short sales in particular can | | | | new program is the most exciting aspect to the |
| take an inordinate amount of time to close. With | | | | Real Estate Professional, sellers, as well as buyers. |
| this increased time comes a very high level of | | | | The lender initially must give the borrower (seller) |
| frustration for all parties to the transaction. | | | | up to 120 days to sell the house. If there is no |
| Thanks in part to urging of the National | | | | willing buyer, extensions up to 12 months may be |
| Association of Realtors (NAR), last year the U.S. | | | | allowed with the approval of the lender. The |
| Treasury Department developed a new program | | | | preliminary short sale agreement must be in place |
| meant to streamline the short-sale process. The | | | | before marketing the home. This new stipulation |
| program when implemented is designed to | | | | will take weeks or even months off the current |
| provide monetary incentives and uniform | | | | administrative process. |
| procedures, while eliminating the detailed and | | | | When a buyer signs a purchase agreement on a |
| circuitous procedures of the past. This new | | | | short sale house, the paperwork must be |
| program is termed Home Affordable Foreclosure | | | | received by the mortgage servicer within three |
| Alternatives Program, or HAFA. | | | | business days. As is the case today, the following |
| When the homeowner is unable to remain in their | | | | documentation must be submitted with this |
| home, due to either financial, family, or job related | | | | Request for Approval of Short Sale (RASS): a |
| conditions, they may be able to sell their home | | | | copy of the purchase agreement, all supporting |
| for less than they owe on the mortgage. This | | | | addenda, and buyer proof of funds if paying cash, |
| situation is called a short sale. The new program | | | | or a pre-approval letter from the buyer's lender. |
| also allows the distressed property to be | | | | At this time, the vast majority of short sales |
| transferred to the lender under a process termed | | | | take from 60 to 90 days to receive lender |
| a Deed in Lieu of Foreclosure. In the recent past, | | | | approval. Many buyers cannot or will not wait that |
| the homeowner came away from the short sale | | | | long. Under the HAFA program, the lender must |
| with stigmatized credit and psyche. | | | | either approve or deny the RASS within 10 |
| HAFA (Home Affordable Foreclosure Alternatives) | | | | business days. If the lender denies the RASS they |
| is meant to assist the homeowner and reduce | | | | must provide a letter explaining the reasoning |
| the stress and long term financial quagmire of a | | | | behind their decision. Closing may not be sooner |
| completed short sale of the past or a foreclosure. | | | | than 45 days from the sales agreement date. |
| No longer will the homeowner (borrower) be | | | | The new HAFA program is designed to assist |
| responsible for the primary mortgage debt. In | | | | everyone concerned with the Real Estate |
| addition, by offering incentives to subordinate | | | | transaction. It may only be implemented with |
| lenders (second mortgages), the borrower will no | | | | Fannie Mae or Freddie Mac insured loans. The |
| longer have to sign promissory notes, come up | | | | homeowner with an FHA or VA Loan may not |
| with cash they do not have, or have judgments | | | | participate in the program. The HAFA program is |
| against them. | | | | intended to assist the homeowner who is in |
| The incentives offered by HAFA include a | | | | serious financial distress, prevent the increase of |
| relocation stipend for the borrower of $3,000. | | | | foreclosure, and, hopefully, create a positive |
| Mortgage servicers can receive $1,500 for | | | | turnaround in the housing market and industry. |
| facilitating the process and administrative costs. | | | | The program was set to begin on April 5, 2010 |
| The lien holders will also receive up to $2,000. The | | | | and is scheduled to sunset on December 31, 2012. |