The Home Affordable Foreclosure Alternatives Program 2011 Update

Lowell MA-On December 28, 2010, the Treasury Department released another update to the Home Affordable Foreclosure Alternatives Program (HAFA). Not surprisingly, the Treasury Department was under the gun as a result of the program’s poor overall performance. According to the Congressional Oversight Panel (the Troubled Asset Relief Program watchdog) through 2010, only $4.3 million has been used for HAFA resulting in roughly 661 closed HAFA short sales since the program launched.
The changes will increase the number of eligible borrowers who may participate in the program and should expedite approvals. Servicers must implement the changes by February 1, 2011.
The Key changes are:
A borrower’s reason for relocation no longer needs to be connected to employment nor be of a certain distance from the property. Borrowers may have moved up to 12 months before certain dates in the HAFA process but may not have purchased another home. Vacant or rented properties will no longer be disqualified from HAFA so long as the property was the seller’s primary residence within the last 12 months
Servicers are not required to determine if the borrower’s total monthly mortgage payment exceeds 31% of gross income. Borrowers will still be required to show a hardship. However, investor may still require it.
Servicers are now required to communicate approval, disapproval, or a counter offer no later than 30 calendar days after receiving an (i) executed sales contract, (ii) Alternative Request for Approval of Short Sale, and (iii) a signed Hardship Affidavit.
If an unsolicited borrower requests HAFA, the servicer has 30 calendar days to determine the borrower’s eligibility and, if eligible, send the borrower the Short Sale Agreement.
Payouts to subordinate liens are no longer limited to 6% of the subordinate liens outstanding principal balance. The Max aggregate payout is still capped at $6,000. It is now up to the investor to determine their allowable %.
Real estate commission cannot be cut to less than 6%, even when pre-applying for the program. This was a major negative previously.

With the number of people upside down in their properties…and th job market the way it is…If you or someone you know that may be in trouble …and could use more information on their…options…to keep or sell their home please contact me.

Chris Tryon
Innovative Realty

This post is for informational purposes only. The information contained herein may not be applicable to every situation or jurisdiction and we urge you to consult your professional advisor prior to acting on information contained herein. The content, accuracy and opinions expressed herein are not verified or endorsed by the sponsor hereof.

A Successful Short Sale

Lowell MA- Buyers and sellers come to a short sale with very different mindsets.

Sellers want closure. They want to know that when they get approval from their mortgagee, the buyer will close and they will know what their future obligations will be.

Buyers, on the other hand, see the short sale process as an impediment, they want the house now! If the seller cannot close within a short period of time, they want to be able to walk away and buy something else.

The only way to manage this situation is to educate everyone on the realities of a short sale transaction. It is usually in the seller’s best interest to do a short sale, provided they are able to negotiate acceptable terms relating to any deficiency. The buyer will usually get a 10% – 15% discount off of the current fair market value of the house, but they may have to wait a long time to get the property.

If your buyer will not wait to find out whether they have a firm deal, or if they will not invest in an inspection report or loan application until the seller has bank approval, then you have a customer who does not want to buy a short sale. If your buyer has any of these objections, let them know that you can show them non-distressed properties (they do still exist) that they can close on very quickly.
Write the contract so that all buyer contingencies (home inspection, obtaining mortgage, title search, etc.) are to be completed within a short time after the effective date of the contract. Do not make the effective date of the contract the same date as when the seller obtains short sale approval.

If the buyer is given the opportunity to do inspections and apply for a mortgage after approval is received, odds are that buyer will find a reason not to go forward with the transaction (buyer’s remorse is a very real condition). By forcing all inspections to be made early on in the transaction, your buyer is making a commitment to the purchase, and is demonstrating an understanding about the condition of the house that is being sold. It also makes negotiating the short sale easier.

If you get approval first and the inspection report comes back with $10,000 worth of repairs, both the buyer and the bank will balk. The buyer will want a large reduction in the purchase price (usually more than the $10,000 estimate to repair) and the bank will not agree to reduce the approved price. Going to the bank up front, with an inspection report backed up by two or three estimates to repair any noted problems gives you the opportunity to get your price approved, based upon the work to be done.

Make sure the buyer puts down a reasonable deposit, in the very beginning. The general rule is that if a buyer defaults under a contract, the earnest money deposit represents the seller’s damages. If no deposit is made, then it is very easy for a buyer to walk away. Most sellers of distressed homes have neither the time, money nor energy to sue a buyer, and proving the damages that the seller suffered due to the buyer’s default, let alone collecting that money, is very difficult.
Remember, the biggest problem with short sales is getting lender approval before the buyer decides to walk away. This can be addressed simply by writing a contract that keeps everyone in the game until a lender’s approval can reasonably be expected.

With the number of people upside down in their properties…and th job market the way it is…If you or someone you know that may be in trouble …and could use more information on their…options…to keep or sell their home please contact me.

Chris Tryon
Innovative Realty

About Chris Tryon

Chris one of Innovative Realty’s Top Producing Team Leaders, and it’s easy to see why.

Chris prides himself on his personal service and his attention to detail, two of the most important traits of a true real estate professional.

Also, in his decade of real estate experience, including luxury residential, commercial, development projects, property management, and rentals, he has developed a complete understanding of the complexities of real estate transactions, making him your residential and investment property authority.

Specializing in the Merrimack Valley Region, Chris’s knowledge of his community, his understanding of his clients’ needs, and his proven marketing strategies have catapulted him to Innovative Realty’s Top Producing Lowell agent.

In today’s volatile real estate market, now more than ever, “Who You Work With Matters!” .