Wednesday, January 5, 2011

Are HAFA Short Sales Working? | Short Sale Distressed Property Designation

Submitted by Tim Harris on January 5, 2011 – 12:40 pm
Why are some HAFA Short Sales working…while others aren’t?
Read on….
According to the Congressional Oversight Panel (the Troubled Asset Relief Program watchdog) thus far  only $4.3 million  has been used for  HAFA..resulting in roughly 661 closed HAFA short sales since the program launched.
(Download the latest HAFA forms here)
Thats it…661 short sales have been approved as HAFA Short Sales.
Pathetic results, I am sure you agree.
The Treasury department is changing the HAFA eligibility requirements which may allow for a significant increase in HAFA Short Sales.
1)  HAFA is now almost..a NO DOC short sale. Servicers are no longer required to verify a borrower’s financial information or determine if the borrower’s total monthly mortgage payment exceeds a 31% debt-to-income ratio. It seems that Treasury has wised up to the fact that it makes no sense to give a hoot about someones income to debt ratios when they are….selling the house.
“While this requirement has set the standard for mortgage affordability under HAMP, it is not as important for homeowners ready to transition out of their home,” a Treasury official said. “Eliminating this requirement further streamlines the process for homeowners applying to the program.”
2) Servicers still must obtain a signed hardship affidavit. So, even though short selling owners no longer have to prove their financial hardship…they must sign an affidavit stating they have a hardship. I am no legal eagle but, doesn’t this hardship affidavit sound utterly pointless?
3) Seconds now receive a max of $6,000. In other words, HAFA pays seconds up to $6000 to accept the short sale. I am assuming that the original HAFA rules still apply that the seconds (and firsts) can’t pursue any recourse if they accept HAFA money.
SIDE NOTE: In a recent interview with a Bank of America executive, I asked him point blank if he knew of ANY investors pursuing deficiency judgements. He said…none. Additionally, he said none of the 500 (ish) investors that BoA servicers NONE are pursuing DJs. Its realistic to believe that DJs will remain a rare event for residential short sales.
4) Borrowers must receive a HAFA Short Sale agreement within 30 days of submitting paperwork.
So, what do you think….will these changes make a difference. Lets be honest…with fewer than 700 approved short sales these changes can only help!
Lisa Ekanger Your Hometown Realtor!

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