Here is a quick break down of the new guidelines…will it change short sales overnight? No. But we have yet to see the bulk of short sales and 2010 will be an epic year for short sales and foreclosures!

The program’s official name is the Home Affordable Foreclosure Alternatives Program (HAFA), and it’s part of an existing initiative, the Home Affordable Modification Program (HAMP). HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which cover over half of all U.S. mortgages; however, Fannie and Freddie will issue their own versions of HAFA in coming weeks.

While HAFA’s goal is simple – increase the number of short sales and “deeds in lieu of foreclosure” by simplifying the process – the rules are complex, and it comes with 43 pages of guidelines and forms. Among other things, HAFA:

• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

• Prohibits servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).

• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed.)

• Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors.

The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements. The program sunsets on Dec. 31, 2012.

To qualify under the new guidelines:

• The property must be the homeowner’s principal residence.
• The homeowner is delinquent on the mortgage or default looks likely. Homeowner is insolvent.
• The loan was made before Jan. 1 this year and is less than $729,750
• The borrowers’ total monthly mortgage payment exceeds 31 percent of their before-tax income.
  

If you are a troubled homeowner, or have a family member or friend facing foreclosure, please give us a call for a confidential consultation about the possibility of a short sale.  Call RE/MAX Executive’s Short Sale Hot Line 866-846-2308 or email  us @ info@selectcharlotte.com

This site is not providing legal or tax advice. The information provided is for educational and informational purposes only. It is recommended that sellers considering a short sale should consult an independent legal and tax adviser for more information.