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Thursday, May 19, 2011

Behind on Mortgage Payments? Short Sale May be the Answer: HAFA Short Sale Program

Yesterday, I spent all day in a continuing education class learning about the government's HAFA short sale program.  I learned some interesting information that could be a lifeline for any of you out there that are missing mortgage payments and are looking down the road at a potential foreclosure.  Help may be on the way.  It is really surprising that lots of homes go into foreclosure without even trying to work out a deal with the bank and go straight into foreclosure.  Don't do it, there is an alternative.  HAFA stands for Home Affordable Foreclosure Alternative, which is just that... a viable alternative to foreclosure.

A short sale means that you have negotiated with your lender to sell the house for less money than you owe on it.   In an non-HAFA short sale agreement, there are some pitfalls you need to look out for- primarily two things:  1) You may not be released from liablility to pay back the short fall the bank gets from accepting less money than you owe and 2) you get $0 at closing from the sale of your property.

Here are the advantages for the seller of a HAFA short sale:
  • Sellers receive $3000 (vs. $0 non-HAFA short sale) relocation expense at closing (funded through TARP money)
  • The foreclosure sale must be suspended while eligibility for the HAFA program is determined and if approved, while the property is being marketed or closing a sale is pending.
  • Sellers are released of all liability on 1st mortgages and subordinate liens!
  • Sellers cannot be required to sign a note or pay additional amounts to satisfy liens
  • The short sale is pre-approved.   This takes more time on the front end of a transaction, but much less time after a purchase contract is accepted by the seller.  This in itself can make a short sale listing much easier to sell.
  • Buyers offers are approved or denied within 10 business days.  If the buyer's offer meets the pre-approved terms, the short sale MUST be approved and the deal gets done!
Many (in fact most) lenders (for a list of servicers who are participating in this program go to http://www.makinghomeaffordable.gov/ ) are participating in the HAFA program because they are getting TARP money for their participation.  If your lender is participating, they are required to offer you this HAFA short sale opportunity prior to starting the foreclosure process.  Once they have mailed you the offer, you have 14 days to respond.   Many people become overwhelmed with anxiety when they become delinquent on paying their mortgage and don't open the mail sent from their lender.   Please open your mail so you won't miss this option!  Or call your loan servicer to find out if this is an option for you.   If you want to keep your house, you may be eligible for a loan modification  program.  If you feel that you must sell or be foreclosed and your home's value is less than you owe, this program could be an answer for you.

One of the big down sides of short-selling your house is that it hurts your credit, although not nearly as much as a foreclosure.  If you simply cannot pay the mortgage and you can't sell the house for what you owe, your options are limited, but the HAFA short sale program has some strong benefits compared to the alternatives!  There is a lot more to this program and the short sale process is very complicated.  But this program (set to expire 12/31/2012 unless extended) can offer lots of American homeowners an out that will help the real estate market overall, help distressed homeowners who might othewise lose their home, release liability for sellers to pay back the short fall from the short sale, and give some money to sellers to help them fund the moving expense from their home.  For more information contact me or go to http://www.jacksonbasshomes.com/ .

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