New HAFA Short Sale Rules – Program Ends Dec 31 2010
The HAFA program simplifies and streamlines the use of short sales by incorporating the following unique features:
• Complements HAMP by providing viable alternatives for borrowers who are HAMP- eligible.
• Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis.
• Allows the borrower to receive pre-approved short sale terms prior to the property listing.
• Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement.
• Requires borrowers be fully released from any future liability for the first mortgage debt. If the 2nd lien holder receives an incentive under HAFA, then the borrower must be released from any future liability on that debt as well (meaning no cash contribution, promissory note or deficiency judgment is allowed).
• Provides $3,000 in relocation assistance to sellers at the close of escrow of the short sale.
• Servicers must evaluate a borrower for a HAMP loan modification prior to any consideration being given to HAFA options.
• The property must be listed with a licensed real estate professional who is regularly doing business in the community where the property is located.
• The sale must represent an arm’s length transaction and that the purchaser may not sell the property within 90 calendar days of closing.
• If the lender requires the borrower make payments during the short sale process, the amount must not exceed 31% of the borrower’s gross monthly income.
• Borrowers must cooperate with the listing broker to actively market the property and respond to servicer inquiries.
• Borrower must maintain the interior and exterior of the property in a manner that facilitates marketability.
• Borrower must make the monthly payment stipulated in the SSA, if applicable.
• As long as the borrower performs in accordance with the terms of the Short Sale Agreement, the servicer may not foreclose on the property during the short sale process.
Loan Eligibility for HAFA Short Sale Plan
• The property is the borrower’s principal residence
• The mortgage loan is a first lien mortgage originated on or before January 1, 2009
• The mortgage is delinquent or default is reasonably foreseeable
• The current unpaid principal balance is equal to or less than $729,750
• The borrower’s total monthly mortgage payment exceeds 31 percent of the borrower’s gross income.
During the term of the SSA, the servicer may terminate the SSA before its expiration due to any of the following events:
• The borrower’s financial situation improves significantly, the borrower qualifies for a modification, or the borrower brings the account current or pays the mortgage in full.
• The borrower or the listing broker fails to act in good faith in listing, marketing and/or closing the sale, or otherwise fails to abide by the terms of the SSA.
• A significant change occurs to the property condition and/or value.
• There is evidence of fraud or misrepresentation.
• The borrower files for bankruptcy and the Bankruptcy Court declines to approve the SSA.
• Litigation is initiated or threatened that could affect title to the property or interfere with a valid conveyance.
• The borrower fails to make the monthly payment stipulated in the SSA, if applicable.
NOTE: For more information on this program, also see my previous blog post “Details of New Obama Short Sale Program (HAFA)”
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