April 5, 2010
A short sale, also known as a pre-foreclosure sale, is a solution to avoid foreclosure in which the bank allows a person (the homeowner or a third-party investor) to satisfy a loan by paying off a percentage of the loan amount
The Federal government has a program called Home Affordable Foreclosure Alternatives Program or HAFA
- 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.
- Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.
— Sellers must be unqualified for a loan modification under the Home Affordable Mortgage Program or be unable to afford the modification.
— The bank will set an acceptable value of the home upfront, based on an appraisal or broker’s price opinion.
— Lenders must approve or deny a purchase offer within 10 days of it being submitted.
— Once the bank approves a home for short sale, sellers may stop paying all related mortgage payments, and unpaid mortgage debt will be forgiven.
— These mortgage payments will not be shown as late on credit reports.
John J. O’Dell
Real Estate Broker
Looking for short sales or foreclosures
Go to JohnOdellRealty.com