The Home Affordable Foreclosure Alternatives (HAFA) program helps struggling homeowners successfully avoid foreclosure by short selling their home with a well developed set of guidelines that provides some cash at closing to the seller ($3,000.00), a formalized timeframe to sell the home and an approved sale price established up front by the mortgage lender. This program does not cover every homeowner and/or every property. See if you may qualify for HAFA assistance. Click Here. Click Here for the HAFA Short Sale guidelines and HAFA 2-1-2011 Update (Supplemental Directive 10-18).
An important change to the Making Home Affordable plan is the inclusion of a Short Sale or Deed-In-Lieu foreclosure alternative.
For eligible borrowers unable to retain their homes through a Home Affordable Modification, MHA will provide incentives to borrowers, servicers and investors to encourage short sales and deeds-in-lieu. Both allow families and servicers to avoid the costly foreclosure process, and to minimize the negative impact of foreclosures on borrowers, financial institutions and communities.
Both a short sale and a DIL (Deed-In-Lieu) provide an opportunity for borrowers to avoid the consequences of foreclosure. In a short sale, a servicer allows the borrower to sell the property at it's current value, even if the sale price is less than the total amount owed on the mortgage. Approval of a short sale requires the borrower to list and actively market the at it's fair value. the sale must have all proceeds (after selling costs) applied to the discounted mortgage payoff. If the borrower actively markets the property but is unable to sell it within the agreed upon time period, a servicer may consider a DIL. With a DIL the borrower voluntarily transfers ownership of the property to the servicer - provided the title is free and clear.
How The Home Affordable Short Sale/DIL Program Works:
Borrower Eligibility: Borrowers will be eligible for the Foreclosure Alternative Program if they meet the minimum eligibility criteria for a Home Affordable Modification but did not qualify for a modification in the end or were unable to sustain payments during the trial period plan or after the final modification. Prior to going in to foreclosure, participating servicers must evaluate each eligible borrower to determine if a short sale is appropriate. Considerations in the determination include property condition and value, average marketing time in the community where the property is located, the condidition of the title including the presence of junior liens and a determination that the net sales proceeds are expected to exceed the investor's recovery through foreclosure.
Property Valuation: The servicer will independently establish both property value and the minimum acceptable net return in accordance with investor guidance and will provide instruction to the borrower's real estate agent regarding the initial list price and any premissable price reductions. The price may be determined based on either: (1) an appraisal performed in accordance with USPAP and/or (2) one or more Broker Price Opinions either of which must be dated within 120 days of the Short Sale Agreement.
Minimum and Maximum Duration: Under the program, servicers will allow borrowers at least 90 days to market and sell the property, with possibly more time based on local market conditions. The property must be listed with a licensed realtor experienced in selling properties in the neighborhood. Marketing of the property may run concurrently with the foreclosure process; however no foreclosure sale can take place during the marketing period specified in the Short Sale Agreement as long as the borrower is acting in good faith to sell the property. There will be a maximum marketing period of 1 year for the property,
Fees and Charges: Servicers may not charge borrowers fees for participation in the Foreclosure Alternative Program.
We believe an educated public is vital in this market, and IML Real Estate will continue to provide updates on this program and others. Considering a short sale? Please contact IML Real Estate with any questions/concerns you may have 1-800-811-7615 or request a free consultation here.