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Treasury Releases Guidance for Making “Home Affordable Short Sales”
12/01/2009 BY: CARRIE BAY - ABRIDGED
The Treasury Department also laid out finalized guidelines for carrying out short sales under the Making Home Affordable program.
The administration is urging participating servicers to follow through with short sales as an alternative to foreclosure for those homeowners that don’t qualify for a reworked mortgage under the Home Affordable Modification Program (HAMP).
To entice servicers to accept a sale on defaulted properties for less than the outstanding mortgage balance, Treasury is offering incentive payments of $1,000 per completed short sale.
- Subordinate lien holders will be paid to release their claims on defaulted properties, up to $3,000 of the short sale proceeds as long as the primary investor agrees to share the earnings, and for this concession, the investor will also receive up to $1,000 from the Treasury.
- For those second lien holders who want more than the $3,000 cap to relinquish their stakes, the Treasury said they can pursue a short sale outside of the federal program.
- Homeowners who agree to a short sale will get up to $1,500 to help with relocation, and must be “fully released” from any future liability, according to the guidelines.
The Home Affordable Foreclosure Alternatives Program (HAFA), as it is being called by the Treasury, was initially announced back in May 2009, but was delayed because of concerns over legalities involved in the process and the rights of second lien holders to hold claim over the property. The Obama Administration has been readying guidelines for the program, and on November 30, 2009, they arrived.
- Under the terms of the program, once a servicer determines a homeowner does not qualify for a modification, the servicer has a 30-day window in which the borrower must be considered for the a short sale under the HFHA program.
- Each participating servicer is required to develop a written policy, consistent with investor guidelines, that describes the basis on which the servicer will offer the (short sale) HAFA program to borrowers.
- Every potentially eligible borrower must be considered for (a short sale) HAFA before the borrower’s loan is referred to foreclosure or the servicer allows a pending foreclosure to sale to go through.
- The servicer must assess the current value of the property, independent of the borrower and any other parties to the transaction. No payment for the valuation can be assessed in advance of the sale.
- Borrowers who qualify for HAFA will be given pre-approved short sale terms before the property is listed, and once an offer is made, mortgage servicers have 10 days to approve or reject the sale.
The HAFA program becomes effective April 5, 2010, but the Treasury said participating servicers may elect to implement the program earlier.
Coldwell Banker offers more information on Short Sales, Click Here for the details
You may obtain the US Treasury Dept. Directive by downloading this (pdf) file
Scot Campbell
Mr. Campbell is the President and Managing Broker of Coldwell Banker - Campbell Realtors in Huntington Beach, CA, and he has brokered over 1,000 homes. Mr. Campbell received his Bachelor of Arts Degree in Real Estate finance, and did his Graduate Studies in Real Estate Economics both at California State University, Fullerton. Mr. Campbell has been licensed in real estate since 1986, obtained his broker’s license in 1990, and was one of the first to pass the State of California Certified Residential Real Estate Appraiser’s exam in 1992. Mr. Campbell has a 100% customer satisfaction philosophy and more than half of his business is from repeat & referrals.
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