Home Foreclosure Alternative Program Providing New Opportunities
The latest attempt to fight an increasing foreclosure crisis is the
Home Affordable Foreclosure Alternatives, also known simply as
HAFA. The program attempts to bridge the gap where HAMP or Home
Affordable Modification Program previously failed. The facts certainly
appear to be dire; throughout the country many homeowners are so far
behind on their mortgage or are upside down that a modification simply
does not make good sense. HAFA attempts to provide an alternative
option, whether it is a short sale, allowing homeowners to sell their
home for less than they actually owe on it or a deed-in-lieu, which
makes it possible for homeowners to simply hand over their homes to
lenders in exchange for being absolved of the outstanding debt.
Historically, short sales have proven to quite difficult to accomplish,
especially with numerous homeowners making requests of some of the
bigger banks such as Bank of America, Wells Fargo and JPMorgan Chase. It
can literally take months to approve a short sale. Banks must weigh
whether it is in their best interest to accept a short sale or pursue
foreclosure. Around the country, realtors are report lost commissions
when buyers involved in such transactions lose patience and move on.
Consequently, a short sale can sell for as much as a 15% discount
because many buyers as well as their agents want to avoid the hassles.
HAFA attempts to rectify such problems by offering cash incentives to
borrowers as well as lenders and loan servicers in order to push short
sales through at a faster rate. It could be that such cash incentive
payments may not be enough of an incentive to actually push a
significant number of short sales through.
In a short sale, when a buyer makes an offer, that offer must be
approved first by the homeowner. It is then sent on to the bank for
approval. Typically, the sellers will list the home at a price as high
as possible in order to try to get the necessary approval from the bank.
Unfortunately, what often happens is that an overpriced short sale will
become stale as buyers lose interest and move on to homes that are lower
priced.
Since HAFA was introduced many realtors have noticed a dramatic change
in the market. The prices of short sales have been slashed and
consequently interested buyers are taking notice. The strategy does
actually make sense. If you are a homeowner who is upside down on your
mortgage, it could be in your best interest to lower the asking price to
below what is actually owed on the property, take an offer and then send
it on through. Since the president has made it known that he fully
intended to request lenders to accept more short sales for the good of
the country, many banks are hesitant to seem as though they are
uncooperative and as a result are looking to fill a quota mandated by
the government for short sales through the new program. There is
certainly no guarantee that a bank will approve a short sale, but they
definitely have more incentive to do so now than they did just a few
months ago.
HAFA not only offers a streamlined process for handling deeds-in-lieu
and short sales but also offers $1,000 incentives to banks that allow
short sales as well as $1,500 bonus payable to homeowners to help them
with the costs of relocation. Some financial experts have predicted that
the program could save numerous homeowners from the possibility of
foreclosure. There are eligibility guidelines that apply to the program,
including a requirement that the property must be the principal
residence of the borrower and the first mortgage must have been taken
out prior to 2009. In addition, the unpaid balance of the loan must be
less than $729,750 and the monthly payment must be more than 31% of the
borrower’s gross monthly income. Finally, the mortgage cannot be
currently in default or at risk of going into default in the foreseeable
future.
Provided these eligibility requirements are met, homeowners will receive
short sale terms pre-approved from their lender as well as the minimum
acceptable requirements for the proceeds from the sale before the
property can be listed for sale with a realtor. Homeowners are required
under HAFA to be released from any liability in the future on the debt
for their first mortgage. In some cases, this may also include
subordinate debts, ensuring the homeowner will be completely free and
clear of their home loan when the home is sold.
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