The Streamlined Short Sale
In 2009, the Treasury Department introduced the HAFA program to provide a practical option for homeowners unable to keep their homes through the existing Home Affordable Modification Program (HAMP). HAFA is the Home Affordable Foreclosure Alternatives program offered through the government's Making Home Affordable Program. It's a continued effort, albeit a work in progress, to help underwater homeowners simplify and streamline the complicated short sale process. The HAFA program began in April of 2010, and has recently been extended through December 31, 2013.
Let’s examine the differences between traditional short sales and HAFA short sales.
A short sale happens when a lender accepts the sale of a property for less than the full amount you owe. Prior to HAFA, it was no secret that attempting to sell short was a lengthy, uncertain process that often times took several months, requiring a boatload of paperwork and lots of effort.
With traditional short sales, homeowners often listed their home for sale with no idea of what the lender would accept. Under HAFA, borrowers receive preapproved short sale terms from the lender prior to putting the home on the market. The updated HAFA short sale rules establish an easy-to-understand process with predefined steps that make it easier for everyone to understand.
The benefits of a HAFA short sale:
- A HAFA short sale completely releases you from your mortgage debt after selling the property. This means you will no longer be responsible for the amount that falls “short” of the amount you still owe. The deficiency is guaranteed to be waived by the servicer. This is a big deal. Junior lien holders (i.e. 2nd mortgages) who participate in the HAFA incentives must also release borrowers from future liability.
- In a HAFA short sale, your mortgage company works with you to determine an acceptable sale price.
- HAFA has a less negative effect on your credit score than foreclosure and even conventional short sales.
- You do not necessarily need to become delinquent on your loan in order to qualify
- When you close, HAFA provides up to $3,000 in relocation assistance.
- Servicers must respond within 45 calendar days after short sale contracts are received.
What are the HAFA requirements?
- Property is principal residence.
- Mortgage originated before Jan. 1, 2009.
- Mortgage is owned or guaranteed by Fannie Mae or Freddie Mac.
- Borrower is delinquent or default is foreseeable.
- Homeowner demonstrates hardship.
- Borrower’s total monthly mortgage payment exceeds 31% of their gross income.
- Unpaid principal does not exceed $729,750.
If you are a Rhode Island or Newport County homeowner struggling with your monthly payment, you're not alone and you do have options. Please contact me if you have questions about short sales or if you need help determining if a HAFA short sale might benefit you. 401-847-8818