Short Sales Made Easier

The Home Affordable Foreclosure Alternative Program (HAFA) took effect in April to standardize and expedite the short sale process. HAFA is an add-on to the more wide-reaching Home Affordable Modification Program (HAMP) that previously was launched in 2009.

The premise of HAFA is that if borrowers are eligible for the modification program but are unable to work out a plan to stay in their home, the owner and the lender have a streamlined process for executing a short sale or a deed in lieu of foreclosure.

Wikipedia defines a "short sale" as:

A sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan (i.e. the mortgage). It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers.

HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac (there are separate guidelines for these mortgages). You can verify whether or not your lender participates in HAFA by looking them up on the Making Home Affordable website. In addition to your lender participating in the program, the homeowner must meet the following conditions:

1. The property must be the borrower's principal residence.
2. The mortgage loan must be a first lien mortgage originated on or before January 1, 2009.
3. The owner is delinquent on payments and/or default is imminent.
4. The unpaid principal amount of the mortgage is equal to or less than $729,750.
5. The owner's total monthly mortgage payment exceeds 31% of their gross income.

The new rules have created standardized forms, procedures and timelines and allow the homeowner to receive preapproved short sale terms prior to even putting the house on the market. The HAFA rules also require that homeowners be fully released from any future liability for the debt after the short sale is completed.

One of the most frustrating things about short sales in the past has been the delay and time it often takes to get an acceptance from the lender. The new HAFA rules also expedite the timeline, making it easier for sellers and buyers to move forward with their transactions.

If you are a homeowner in distress, or you know of someone having difficulty meeting their financial obligations, there is help available. The Housing Council offers free and confidential counseling and is certified by HUD (U.S. Housing and Urban Development).

If you are considering a short sale, we have agents with extensive training to assist you. Simply contact a Nothnagle agent direct or call 899-MOVE to get started.