Archive for 'Home Affordable Foreclosure Alternatives'

How does a HAFA short sale work?

Tuesday, August 17th, 2010 at 10:37 pm  
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How do you start a HAFA short sale?

Scenario 1

A HAFA short sale is automatically initiated when a HAMP loan mod is denied or fails.

- The lender has 30 days to determine pre-approved “Minimum Net Proceeds”

- The borrower is send short sale agreement (SSA)

- The borrower has 14 days to respond and agree to participating in HAFA

Scenario 2

The borrower requests a HAFA short sale

  • The borrower sends RASS (Alternate Request for Approval of Short Sale)
  • Along with the RASS the borrower also sends:
    • The offer and proof of funds/loan pre-approval from the buyer
    • The borrower financials and hardship info

The lender then has 30 days to review the borrower financials and approve or disapprove as a HAFA short sale and set their “Minimum Acceptable Net Proceeds”

The lender then has 10 days to approve/decline any offers submitted once the “Minimum Acceptable Net Proceeds” number has been set

Can a lender be forced to use HAFA?

Let’s get back to our two different scenarios we outlined:

  • Scenario 1 : lenders must comply with HAFA (carry-over from the HAMP program)
  • Scenario 2: lenders may elect to reject HAFA and do a traditional short sale

How is the “Minimum Acceptable Net Proceeds” Set?

The lender has right to use whatever standardized formula that they choose to set their minimum

Most lenders will use AVMs and BPOs to determine the acceptable net proceeds as a percentage of FMV.

Lenders must accept any offer within business 10 days that is at or above the Minimum Net Proceeds.

The lender has the right to accept offers which give them a net proceeds below the minimum they have set.

What is a HAFA short sale?

Sunday, August 8th, 2010 at 2:01 pm  
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What is HAFA?

HAFA is the new part of the “Making Home Affordable Program” passed by the government.

HAMP is the loan modification arm of the program and HAFA is the short sale arm of the program.

Neither program is mandatory by law for banks or lenders but there are incentives attached to the program to make it attractive for lenders to participate.

If the lender is the services for the loan then they may be required to use HAFA/HAMP if the investor requires this.

HAFA Benefits

For the First Lender:

- government gives $1500 to the senior lien (1st position) participating in HAFA

- First lender gets $1 for every $3 that the first lien allows to go to the junior liens (2nd position) with a max of $2000 to the first lien holder if they allow $6000 to the second lien holder.

For the Second lender:

Will be allowed 6% of their unpaid principal balance (UPB) capped at a maximum of $6000. (this is where most HAFA short sales will fall apart)

For the Seller:

- $3000 at closing for “moving expenses”

- lenders cannot ask for a cash contribution

- lenders cannot ask for an unsecured/promissory note

- lenders cannot pursue the seller for the deficiency

In a nutshell: they give you money and you walk have no personal liability (to the lender that is). There may be tax liability.

Who Qualifies for HAFA?

There are some qualifications for the borrower/property to allow a HAFA to work.

Requirements:

- property has to be a primary residence

- property is not vacant up to 90 days prior to the close of escrow

- mortgage is a 1st loan originated before 1/1/09

- mortgage balance is less than $729,750

- borrower delinquent or default is foreseeable

- monthly mortgage payment is over 31% of the the borrower’s gross income

For properties with 2 to 4 units the requirements are slightly different, but at least one unit has to be owner occupied.