New Government Short Sale Program Finally Rolls Out the Cash
Finally, there is a program where you can receive up to $3000 for doing a short sale rather than foreclosing. If this applies to you or someone you know, read on.Back on November 30th 2009, the federal government announced a new program to help troubled homeowners who were not succeeding in their attempts to loan modify. The program was somewhat revolutionary - loan modifications were failing right and left and even if some lucky borrower managed to get through the harrowing process of modification, most were back in the foreclosure process within 6 months. Why not take these same homeowners and allow them to sell their home through a pre-approved short sale? This HAFA program (Home Affordable Foreclosure Alternative) was set to be rolled out by the banks April 5, 2010. It promised cash to troubled borrowers who completed a short sale rather than simply walking away from the home. Further the price would be established in advance by the lender, paperwork would be standardized amongst lenders, the borrower would be freed from the balance of the mortgage, and the process would be faster and less painful for all involved. Finally - a common sense path to avoiding foreclosure had been found! The release date finally arrived on April 5th and nothing. That's right, nothing happened.
Consumers contacting their banks were told "we haven't been trained on that" or "we don't know anything about that" and so on. Real estate agents excited by the initial hype began to speak in somber tones as to the reality of this program ever seeing the light of day for the consumer. So now, some 6 months after the release - we are happy to announce the HAFA program IS finally available to the troubled homeowner! So what are the benefits and who qualifies for this program? The primary benefits are:
It requires that the borrowers be fully released from future liability for the first mortgage debt. Even second liens must release from liability if the lender participates.
Allows borrowers to receive pre-approved terms for their short sale before listing the home.
Financial incentives to the borrower for participating of $3000 in relocation assistance. Lender cooperation in postponing foreclosure for a six month period
Option to deed the home back to the lender (rather than foreclose) if the short sale is unsuccessful
Standardized paperwork and procedures.
Less damage to credit vs. a foreclosure
Who qualifies for the HAFA program? The criteria are the same as the Home Affordable Modification Program:
-Must be your principal residence.
-Loan was originated prior to January 1st, 2009
-The mortgage is delinquent or default is reasonably foreseeable.
-The borrower's total monthly payment exceeds 31% of their gross income
-The principal balance is no more than $729,750
-The loan may not be an FHA or VA loan
-Cannot be sold to anyone who is family, a business relationship, or personal relationship
For those of you who have an FHA loan - don't despair - there is also a pre-approved short sale program available through HUD. Although the cash incentives are less (range from $750-$1000) the FHA program has been in effect with great success for months.
What if you don't match one or more of the criteria - does that mean you cannot complete a short sale? Absolutely not! We have been doing short sales successfully for close to three years without any "pre-approval" programs and we will continue to do so in the future. The benefits of a short sale remain the same with or without cash incentives: Less damage to credit, better protection of neighborhoods, and avoidance of the stigma of foreclosure.
In these challenging real estate markets, it is nice to be able to report some positive news. Most troubled homeowners are afraid and needing guidance - yet only one in ten will ever talk to a real estate agent prior to simply foreclosing.
Posted at 04:16PM Oct 27, 2010 by Louisa Ward & Robyn Viktor in General | Comments[0]
