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ABOUT SHORT SALES & FORECLOSURES
By Carol
C. Cummings R, CRB, CRS, GRI, SRES, SFR At the beginning of 2009, the United States Department of Treasury announced the Making Home Affordable Program. The program basically consisted of 2 separate programs: 1-Home Affordable Refinance Program provided borrowers of Fannie Mae or Freddie Mac owned loans with a solid payment history the opportunity to refinance at current lower fixed rates, even though their home values had dropped below the 80% loan-to-value ratio. 2-Home Affordable Modification Program (HAMP) provided a venue for “at risk” borrowers to apply for a “modification” to their loans, whereby the monthly payment would adjusted to no more than 31% of the borrower’s gross monthly income. Modifications could include interest rate adjustments, as well as stretching the amortization to a period of up to 40 years. Fast forward…April 5, 2010….via Supplemental Directive 09-01, the Department of Treasury recognize that the refinance and loan modification programs of 2009 do not work for many borrowers, and millions of home owners still face foreclosure. Therefore, a system for foreclosure alternatives is developed. This Supplemental Directive provides guidance to servicers for adoption and implementation of the Home Affordable Foreclosure Alternatives Program (HAFA). HAFA is part of HAMP and provides financial incentives to servicers and borrowers who utilize a short sale or a deed-in-lieu to avoid a foreclosure on an eligible loan under HAMP. Both of these foreclosure alternatives reduce the need for potentially lengthy and expensive foreclosure proceedings, are more favorable for the property, lender, borrower, and community. How does HAFA work? The Loan Servicer must first evaluate and deny a borrower for a HAMP loan modification prior to any consideration being given to HAFA options. A loan meets the basic HAFA eligibility criteria if all of the following conditions are met: · The property is the borrower’s principal residence; · The mortgage loan is a first lien mortgage and it commenced on or before January 1, 2009; · The mortgage is delinquent or default is imminent; · The current unpaid principal balance is equal to or less than $729,750; and · The borrower’s mortgage payment is more than 31% of the borrower’s monthly gross income Short Sale Agreement. The HAFA SSA, outlines the roles and responsibilities of the servicer and borrower in the short sale listing process and provides key marketing terms, such as a list price or acceptable sale proceeds and the duration of the SSA. The property must be listed for sale with a licensed real estate professional who does regular business within the community of the subject property. In the event that a borrower has an executed sales contract and requests the servicer to approve a short sale under HAFA before a SSA has been executed, the servicer must still evaluate the borrower for HAFA short sale approval. Deed in Lieu (DIL) The Servicer and the Borrower may also agree to a Deed in Lieu, in which the parties mutually agree to that the Borrower will surrender clear title of the property to the Lender in exchange for forgiveness of the mortgage owed. The Borrower promises to vacate and leave the Property in excellent condition by a specified date. In accordance with HAFA, participants of the short sale and deed in lieu programs will be compensated $1500 toward relocation costs. As the short sale, foreclosure, and bank owned property become common place on Kaua`i, many real estate professionals have invested and educated themselves through the National Association of Realtors’ Short Sale& Foreclosure Resource (SFR) certification, as well as certifications awarded by private educational vendors. For more information on selling or buying a distressed or bank-owned property, contact your Realtor today! For questions about this article and/or Short Sales & Foreclosures contact Carol Cummings. |
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Lihue Office 2970 Kress Street Lihue, Kauai, Hawaii 96766 Telephone (808) 245-1651 Toll Free (800) 645-1651 Fax (808) 246-0230
Site Map