Joe Foley

If you have been trying to get a loan modification done with no success, call me to discuss the benefits of doing a Short Sale on your home under the new government HAFA Guidelines

HAFA is Officially Underway...from DSNews.com

By: Brittany Dunn 04/05/2010

The deadline for servicer implementation of the administration's Home Affordable Foreclosure Alternatives (HAFA) program has arrived.

HAFA, which is part of the Home Affordable Modification Program (HAMP), aims to help homeowners who are unable to qualify for a loan modification under HAMP by providing them with the option to pursue a short sale or deed-in-lieu. Under the program, financial incentives are provided to servicers and borrowers who utilize these foreclosure alternatives.

As DSNews.com reported, the Treasury Department released HAFA guidelines on November 30, 2009, but participating servicers were not required to implement the program until April 5, 2010. That deadline is now here, but the National Association of Realtors said its members are already hearing that the employees of many servicers have not yet heard about the program, making it clear that many servicers will not "hit the ground running."

However, many servicers are ready, and the program is expected to be a success.

According to the program guidelines, once a borrower is determined to be ineligible for a HAMP modification, the servicer must consider that borrower for HAFA within 30 days. Every potential eligible borrower must be considered for the program before the borrower's loan is referred to foreclosure or the servicer allows a pending foreclosure sale to be conducted.

If the servicer determines that the borrower is eligible, the short sale or deed-in-lieu process will begin. Qualified borrowers will be given pre-approved short sale terms before the property is listed, and once an offer is made, mortgage servicers will have 10 days to approve or reject the sale.

To encourage HAFA participation, the Treasury Department raised financial incentives under the program in late March. Borrowers are now eligible for $3,000 in relocation assistance, and servicers will receive $1,500 to cover administrative and processing costs for a short sale or deed-in-lieu completed under the program.

In addition, investors will be paid as much as $2,000 for allowing a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders. This reimbursement will be earned on a one-for-three matching basis, and to receive the incentive, subordinate lien holders must release their liens and waive all future claims against the borrower.

According to Treasury, the foreclosure alternative options offered under HAFA reduce the need for potentially lengthy and expensive foreclosure proceedings and also help preserve the condition and value of the property by minimizing the time a property is vacant and subject to vandalism and deterioration. In addition, Treasury said short sales and deeds-in-lieu generally provide a substantially better outcome that a foreclosure sale for borrowers, investors, and communities.

From DSNews:

The Obama administration plans to announce a major new housing initiative Friday involving principal write-downs for underwater borrowers and temporary assistance for unemployed homeowners, according to sources.

Details at this point are limited, but it's expected that principal reduction will become a central consideration in Home Affordable Modification Program (HAMP) evaluations, with the Treasury offering servicers additional incentives to trim mortgage debt for those who owe more than their home is worth.

In addition, federal funding is being set aside for the Federal Housing Administration (FHA) to offer new loans to homeowners whose outstanding mortgage debt is up to 115 percent of the home's value.

The plan will also provide mortgage relief to unemployed homeowners who face obstacles obtaining traditional modifications with their loss of income. It will require lenders to temporarily reduce monthly mortgage payments for at least three months to a set percentage of the borrower's federal unemployment benefits.

Seems to be the Million Dollar Question these days, right? I know, for sure, that there are many homeowners in Corona that are in various stages of the default or foreclosure process. It is a crazy and stressful time for many hardworking families to be sure.

The best idea for you may be to do a short sale on your home. Meaning, you list your home for sale with a local Realtor, present an offer to the bank, and have them agree to take an offer on your home that is "short" of the mortgage balance. Below is a basic outline of how the process works:

SO YOU WANT TO SHORT SELL YOUR HOME?

If you want to sell your property because you can no longer afford the payments, contact your local Realtor right away to list your property for sale in the local Multiple Listing Service.

Once an offer is received on your property, there are a number of paperwork items that MUST be completed and submitted to your bank along with the offer. Here are those items (may vary slightly from lender to lender):

1.) A written explanation of your Hardship

2.) Financial Documentation including:

A signed copy of most recent Federal Tax Return including all schedules and forms

Copies of your two most recent pay stubs indicating year to date earnings

If Self Employed, 4 months of most recent, consecutive bank statements

3.) Copy of Executed Listing Agreement between you and your Realtor

4.) Detailed Listing History (copy of the MLS Printout)

5.) Estimated Closing Statement or HUD-1 (to show the bank their net on the sale)

6.) Copy of the Executed Purchase Contract (Signed Offer paperwork)

7.) Third Party Authorization (your authorization to allow your Realtor, or designee to discuss your account with your lender, if desired)

HOW LONG DOES THE PROCESS TAKE?

Once all of the REQUIRED documentation is submitted, a decision is typically completed within 30-45 days. Some common reasons decisions may be delayed include low offers under Fair Market Value and Junior Liens (2nd or 3rd mortgages) held by other banks or investors who must also agree to the terms of the Short Sale Agreement.

WILL YOU HAVE TAX LIABILITIES?

Consult with your Tax Professional to find out if you will be liable for any taxes as a result of your Short Sale.

HOW WILL A SHORT SALE AFFECT MY CREDIT?

The completion of a Short Sale will affect your credit. The final disposition of a completed Short Sale may show up on your credit report as "Account Paid in Full for Less than Balance". Typically, a Short Sale will hurt your credit for 2 years, versus 5 years for a Foreclosure.

WILL I BE REQUIRED TO PAY BACK THE DEFICIENCY BALANCE (AMOUNT OF THE SHORTAGE)?

The Approval of Short Sale Letter from your Lender with specify the terms of the short sale approval. Your Loss Mitigation specialist at your Lender will be able to explain whether the Deficiency Balance will still be owned.

I hope this information provides some clarity on how the process works. If you have any questions about Short Sale options for your Corona, California home, please contact me and we can figure out how to help you!!

It is almost time!! Much speculation surrounds the timing of banks releasing their so called, "Shadow Inventory". Many of the top industry experts I have talked with have put the total number of homes in shadow inventory at as many as 7 million. Obvioulsy, our market here in Corona makes up a small percentage of that, but a recovery does not appear likely any time soon. We are looking at about 33 months on a national average to deplete this inventory. That is assuming that there are no more foreclosures added in the next three years.....not likely!!