HAFA changes as of April 5, 2010 & How they affect you

HAFA (Home Affordable Foreclosure Alternatives) changes went into effect on April 5, 2010. What's HAFA you may ask? It's an "alternative" program created to help homeowners who may not have qualified for a loan modification under HAMP (Home Affordable Modification Program).

Here's a quick synopsis of standard loan products offered to consumers. As noted on the page to the link for "loan products," Fannie Mae began offering refinance options per the "Making Homes Affordable" program. The goal of this program as announced by President Obama is "to provide access to low-cost refinancing to responsible homeowners suffering from falling home prices." The expectation was that these changes would relieve people of the strain of an interest-only loan or short term ARM, reduce their Principal and Interest payment and place them in a more stable loan product. In short, DON'T do any 5/1 or 7/1 Adjustment Rate Mortgages and avoid interest-only loans altogether. Lenders may not like this advice. Thats OK. By virtue of my nature I simply don't believe in "predatory" practices. "Predatory" practices put my needs 1st and my client's needs last. NO GOOD.

Here's a quick summary of HAFA & Changes from Fannie Mae as of June 1, 2010:

• On June 1, 2010 Fannie Mae released their servicing guide announcement SVC20-10-07: Introduction of Fannie Mae's HAFA program. This guide provides servicer guidance and direction for using the short sale or deed-in-lieu (DIL) process for borrowers who qualified for, but did not complete a loan modification with HAMP. In essence it covers servicers incentives, standard forms to use, and timeframes for completion.

HAFA programs features:

• Uses verified borrower financial & hardship info collected in conjunction with HAMP eliminating the need for additional eligibility analysis.
• Allows borrower to receive pre-approved short sale terms prior to the property listing.
• Prohibits servicer from requiring as a condition of approving the short sale, a reduction in the agreed upon Realtor commission in the listing agreement. Good stuff. 8-)
• Releases the successful HAFA borrower from future liability for the debt. (no deficiency judgments...whoo hoo!!!!)
• Uses standard processes, documents & timeframes. (Yes,saves time & expedites the process).
• Provides financial incentives to borrowers, servicers and subordinate lienholders.

Servicer incentives: $2,200 for short sale. $1,500 for deed-in-lieu (DIL)

Borrower incentives: Short sale of DIL- $3,000 to assist with relocation expenses.

**Pls note, in most cases the borrower will receive funds at closing of the short sale, or within 5 days after the servicer accepts DIL, as long as the home is vacated and in acceptable condition.**

I hope this post answered a few lingering questions you may have had. Don't hesitate to e-mail or call me with additional questions/concerns. While I'm not a Tax Professional, Attorney, or Lender I'll do my best to help with Real Estate related inquiries related to buying & selling homes; thats my specialty. Thanks again for reading my blog & HAPPY HOUSE HUNTING. As always, I'm never too busy for you or your referrals.

Short Sale or Foreclosure which is worse?

Financial hardship is facing many people in todays market. How did they get in such a tough position? What led to the hardship? Each scenario is different. There are numerous reasons why people are facing the decision to do a short sale on their home or face possible foreclosure: loss of income, bad loans, overspending, poor payment habits, etc.

Let's consider a "short sale" as "pre-foreclosure." Its an option that can prevent someone from facing the embarrassment & negative impact on credit from going through a foreclosure. Can a short sale appear on your credit report? Yes. How bad is that? Depends. Depends upon whether your hardship involved past due payments or a bad loan. There are homeowners who fell behind in making their monthly PITI payment and some folks who had a lender offer them an Adjustable Rate interest-only loan. Interest only loans do major damage because your "principal" on your mortgage is not being paid. The balance owed increases year after year. Ultimately, people with these loans end up "upside down," owing more on their home than its worth; hence the need to do a short sale. By definition a short sale is a sale of real property in which the lender approves the sale of the home for less than the amount due. The lender is being "shorted." Attractive to lenders....not necessarily. In some cases short sales are more desirable to the lender than doing a foreclosure. How beneficial is a short sale to the home owner? Again, it depends. It allows the homeowner to be relieved of the debt and further financial ruin. There's always the possibility of a "deficiency judgment" being filed against the homeowners. Laws vary by state on types of instruments used to secure a mortgage on a home; trust deed or mortgage. This mere fact warrants clarity on what did you sign when you bought your home. Most people don't cover this amount of detail at the settlement. There's just a whole lot of signing. Ask questions. You can never ask enough. For this reason its best to consult with a tax professional and your lender for detailed info on the effects this could have on you. In addition to working with Realtors, your lender, tax professional, a real estate attorney for help with the process, DO YOUR OWN RESEARCH. Learn all you can, so you're equipped to cover your interests as well. This post is one in many to come on this topic. Stay tuned for more on short sales. Thanks for reading my blog & happy house hunting. As always, I'm never too busy for you or your referrals.