Help for Upside Down Sellers
Relaxed short-sale guidelines may help upside down sellers The simplified rulings are anticipated to help homeowners stay out of foreclosure.
Sellers struggling to dispose of their homes through a short sale process are getting some assistance, we can thank the federal government Home Affordable Foreclosure Alternatives (HAFA) program.
Until this point, a great number of short sales, where the existing lender negotiates a sale agreement of the home for smaller amount than than what's owed -- have taken several months to transact, with complicated and lengthy process eventually failing, with the net result being a foreclosure.
That is changing. HAFA has established a streamlined short-sale procedures and allows inducement for homeowners and banks to work in harmony to steer clear of foreclosure. The new guidelines are intended to eliminate the short-sale road blocks. This simplified process for short-sales will definitely help upside down borrowers.
Prior to HAFA, homeowners put their homes on the market without a clue as to what the bank would accept.
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A great many homeowners and their real estate agents have had zero luck in sorting out the short sale problems have thrown up their hands in dispair. Even after completing the "correct paperwork", sometimes there have ben a three or four month wait for a lender response.
With the new HAFA guidelines, homeowners receive pre-approval short-sale stipulations from the lender prior to listing the home for sale on the market.
The revised short-sale rules clearly sets out an easy-to-understand defined step process allowing it to be simpler for everyone to comprehend
These HAFA Eligibility requirement guidelines apply only to banks that partake of the
Home Affordable Modification Program (HAMP) voluntarily. HUD states that over100 servicer providers have agreed to take part in HAMP, covering in excess of 89% of the outstanding mortgage debt in the US. For HAFA
eligibility, existing borrowers must first complete an application for a HAMP loan modification. Owners not qualifying for loan modifications or skip payments at some point in the beginning loan-modification time frame may be
qualified for HAFA. Additional HAFA requisite include:
- Borrower's total monthly housing payment exceeds 31% of gross income
- Mortgage originated before Jan. 1, 2009
- Property is principal residence.
- Borrower is delinquent or default is foreseeable.
- Mortgage is owned or guaranteed by Fannie Mae or
- Homeowner demonstrates hardship.
- Unpaid principal balance does is not excess of $729,750.
HAFA guidelines, now require lenders to propose a short sale to the borrower in writing within 30 days providing the borrower doesn't qualify for or fails complete an agreement for a loan modification. Homeowners must then reply within a 14 day period to the short-sale agreement offered by the lender.
I think it's important that lenders in the program are required to propose a short sale prior going into foreclosure.
When a purchase contract is written, borrowers are required to forward the ratified sales contract on to the lender including the buyers' pre-approved status plus the status of any negotiations with any other holders of liens on the property of the seller within three days. Lastly, the lender is required to approve or decline the submitted contract within a 10 day timeframe.
HAFA requirements also set out that banks must discharge borrowers from any requirements to repay any discrepancy between the existing loan balance and the sales price. No deficiency judgments can be recorded for either first or second loans.
More incentives. Previously, short sales were particularly difficult for borrowers with multiple loans on their property, as the sale on the home generally cleared up the first loan. HAFA's financial inducement include a payoff as much as $3,000 to holders of second mortgages.
Holders of second trust deeds often have balances of five to 10 times the $3,000 payment, although if the home goes to foreclosure, holders of second mortgages not likely to receive any money. At least they are guaranteed a token amount
Further HAFA financial incentives provide for $1,000 to a loan servicer to cover the costs of administrative fees, and as high as $1,000 to mortgage investors that agree to allocate short-sale balance with holders of second liens and as much as $1,500 in relocation fees to the homeowner.
A allocation for moving expense provides an incentive for sellers to remain in the home until the short sale process is completed,. Owner-occupied properties typically remain in superior condition over vacant homes.
Article by Gene Wright,
Jan. 21, 2011
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