Tuesday, April 6, 2010 | Miami Short Sales | Posted by Miami real estate agent
Today started the new short sale process which is believe to standardize, speed up and simplify the short sale nightmare we have been dealing with for sometime now. The major problem is that many lenders don’t know about the process and neither to say homeowners, its out duty as Realtors to spread the word and cooperate with this process and hope it will work as fast and as effective as it was meant to be.
Due to the complexity of this process and its guidelines i have decided to post here some Frequently asked questions and Video to help you understand in plain english what is HAFA about and how will affect the short sale process and the benefits for Homeowners, Buyers and Realtors.
| FAQS – QUESTIONS |
ANSWERS |
| WHAT’S HAFFA? |
HAFFA is Home Affordable Foreclosure Alternative. This program is design to speed up the short sale process and is an amendment to the existing HAMP program (Home Affordable Modification Program) |
| HOW LONG DOES THIS PROGRAM LASTS? |
From April 5, 2010 until December 31, 2012. |
| PROGRAM BENEFITS |
- Offers Monetary Incentives to Homeowners for the purpose of Relocation**See details of program below.
- Lender Must respond on an specific time frame, Speeding up Short Sale decision
- Lender will let the homeowner know the minimum short pay off they are willing to accept before presenting a purchase offer.
- Lender forfeits ability to pursue deficiency judgment from homeowner
- The Process uses standard forms for all lenders. Promises to be a more organized system.
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| HOW CAN I VERIFY IF MY LENDER IS PARTICIPATING ON THIS PROGRAM? |
Until now there are over 100 lenders participating on this program for an updated list go to: http://www.makinghomeaffordable.com/contact_servicer.html |
| QUALIFICATION REQUIREMENTS |
- ONLY Primary homes qualify. NO Investment properties
- Loan must have originated before Jan 1, 2009
- The Loan is a 1st Loam Mortgage No Lines of Equity or 2nd Mortgages
- Your unpaid balance loan does not exceeds or is equal to $729,750
- Borrower’s total monthly mortgage payment exceeds 31% of borrower’s gross income. (I can help you figure this out)
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| WHAT HAPPENS TO THE 2ND MORTGAGE? |
Homeowner must work with 2nd lien holder to get a release of the loan in order to move forward with a short sale or better yet have a short sale specialists handle this on the homeowner’s behalf |
| WHO SETS THE LISTING PRICE? |
Again, now the lender/servicer will inform the homeowner on their short sale approval letter how much they will take as a short sale pay off amount. terms and conditions as well as a list of expenses will show on the short sale approval form.*Download this form on the links shown below |
| DOES THE BORROWER NEEDS TO SUBMIT ALL THE PAPERWORK AS BEFORE? |
NO. If the borrower has applied for modification does NOT need to present all paperwork as before example: 2 years income tax returns, most recent bank statements, most recent pay-stubs etc since they have already provided all of the above, the lender will work with their existing file however they must send updated documentation. If a borrower is starting the process Step 1 = Applying for a Loan Modification, then its needs to send a full file |
| WHAT HAPPENS TO THE UNPAID BALANCE? |
The amount of debt forgiven might be treated as income for tax purposes. Under a law expiring at the end of 2012, however, forgiven debt will NOT BE TAXED IF the amount does not exceed the debt that was used for acquisition, construction, or rehabilitation of a principal residence. Check with a tax advisor. |
| WILL MY CREDIT BE AFFECTED ON A SHORT SALE? |
YES, The servicer will report to the credit reporting agencies that the mortgage was settled for less than full payment, which may hurt credit scores. The amount of points or the way that it will be affected is unknown and it varies depending on each particular borrower. |
STEP 1: – APPLY FOR A LOAN MODIFICATION
STEP 2: – REQUEST A SHORT SALE
STEP 3: – CLOSE ON THE SALE OF YOUR HOME
DOWNLOAD BORROWER FORMS HERE:
Request for Loan Modification
Tax Form 4506 must be sign and completed by Borrower and presented with the loan modification form
Short Sale Agreement (Exhibit A) – Last updated: March 26, 2010
Request for Approval of Short Sale (Exhibit A1) – Last updated: March 26, 2010
Alternative Request for Approval of Short Sale (Exhibit B) – Last updated: March 26, 2010
FREQUENTLY ASKED QUESTIONS FOR NEW SHORT SALE PROCESS HAFA (Home Affordable Foreclosure Alternatives Program)
WHAT’S HAFA?
HAFA was created as a extension or complement to the existing HAMP program (Home Affordable Modification Program) providing other alternatives to homeowners that do qualify for Loan Modification Programs but are unable or don’t want to keep their homes.
The HAFA program may make a short sale or a deed-in-lieu of foreclosure an option to help homeowners avoid foreclosure. The HAFA Program, which will start on 04/05/2010, gives banks and servicers, 1st loan holders, 2nd loan holders, etc and sellers incentives for these transactions, it was also created to streamline the process by using standard forms and processing. HAFA program ends on December 31, 2012.
$$ WHAT ARE THE INCENTIVES $$
The HAFA Program gives $3,000 to homeowners for relocation assistance, $1,500 to servicers = banks for administrative and processing costs, and up to $2,000 to investors who allow up to $6,000 in short sale proceeds to be distributed to subordinate lien= 2nd and 3rd loans holders.
ELIGIBILITY AND NOTIFICATION
Each Lender/Bank or Servicer follows its own own policies and determines if the homeowners/borrower is eligible for this program. The Servicer usually the Bank will listen to a short sale request if the borrower qualifies as shown below
TIME TABLE
1 STEP – THE BORROWER MUST QUALIFY OR DO ONE OF THE FOLLOWING:
TIME FRAME: 30 DAYS – LENDER OR SERVICER MUST CONSIDER IF THE BORROWER IS ELIGIBLE FOR HAFA
-Does not Qualifies for a HAMP trial period plan
-Does not succesfully complete a HAMP trial period plan
-Is delinquent of a HAMP Modification (misses at least 2 consecutive payments)
-Requests a short sale or DIL
If a servicer has not already discussed a short sale or DIL with the borrower, it must notify the borrower in writing of these options and give the borrower 14 calendar days to respond, orally or in writing. If the borrower does not respond, that ends the servicer’s duty to give a HAFA offer. If the borrower asked for consideration but a short sale or DIL is not available, the servicer must inform the borrower with an explanation and provide a toll-free number.
WHO IS ELIGIBLE FOR HAFA?
-Principal residence.
The property may be vacant up to 90 days before the date of the Short Sale Agreement (SAA), Alternative Request for Approval of Short Sale, or DIL but only if the borrower documents they were required to relocate at least 100 miles from their home for purposes of employment and they have not purchased another property in the 90 day period.
-Got the first mortgage on the home before 2009
-Mortgage delinquent or default is reasonably foreseeable.
If the borrower is not delinquent then it must show that it could become delinquent soon like used up savings.
-Cannot be a luxury home.
Unpaid principal balance no more than $729,750 (higher limits for two- to four-unit dwellings)
-Borrower’s total monthly payment exceeds 31% of gross income
2ND STEP – SHORT SALE AGREEMENT
TIME FRAME: 14 DAYS – BORROWER HAS TO SIGN IT AND RETURN TO THE BANK OR SERVICER
The borrower has 14 calendar days from the date of the Short Sale Agreement (SSA) to sign and return it to the servicer. The SSA must give the borrower an initial period of 120 days to sell the house (servicers may extend up to a total of 12 months, if agreed to by the borrower).
3RD STEP – PURCHASE OFFER
TIME FRAME: 3 BUSINESS DAYS – BORROWER OR REALTOR MUST SUBMIT THE PURCHASE AGREEMENT AND THE COMPLETED REQUEST FOR APPROVAL OF SHORT SALE (RASS) TO THE BANK OR SERVICER.
Within 3 business days of receiving an executed purchase offer, the borrower (or agent) must submit a completed Request for Approval of Short Sale (RASS) to the servicer, including A copy of the sale contract and all addenda Buyer documentation of funds or pre-approval/commitment letter from a lender All information on the status of subordinate liens and/or negotiations with subordinate lien holders.
4TH STEP - SERVICER OR BANK APPROVAL
TIME FRAME: 10 BUSINESS DAYS – SERVICER HAS TO APPROVE OR DECLINE THE SHORT SALE
Within 10 business days after the servicer receives the RASS and all required attachments, the servicer must approve or deny the request and advise the borrower (with a statement of the reasons in the case of disapproval).
5TH STEP – CLOSING AND LIEN RELEASE
TIME FRAME: 45 DAYS OR SOONER DEPENDING ON THE BORROWER
The servicer may require the closing to take place within a reasonable period after it approves the RASS, but not sooner than 45 days from the date of the sales contract unless the borrower agrees. The servicer must follow local or state laws to time the release of its first mortgage lien. If local or state law does not require release within a specified time, the servicer must release its first mortgage lien within 30 days. Investors must waive rights to seek deficiency judgments and may not require a promissory note for any deficiency. Rules also apply to participating junior lien holders.
Many Lenders are already participating and have implemented the process even before today’s date. Over 100 lenders are participating and some of them are Bank of America, Citi Bank, Wellsfargo. The program reportedly covers servicers handling more than 90 percent of all mortgages.
Some homeowners who are behind mortgage payments have received notification thru mail of this new implementation.
Call me today to explain you more in detail how the process works.
VALUABLE LINKS WITH ADDITIONAL INFORMATION:
Participating Lenders
Understanding New HAFA Process and Eligibility Video
