Understanding the HAFA Short Sale Program

Troubles with the HAFA Short Sale Program

I was just out cruising the Internet and I read a blog post where an agent was seeking support for her HAFA short sale. Troubles with a short sale (not just a HAFA short sale) are a dime a dozen.

Trying to manage all of the details of the transaction, keeping the buyers and sellers happy, and getting multiple banks to move towards short sale approval is not easy feat, even for a seasoned professional.

HAFA Review

You may recall that HAFA stands for Home Affordable Foreclosure Alternatives, which is the name of the Treasury program, which allows certain distressed borrowers to participate in a short sale or a deed-in-lieu of foreclosure with some specific benefits.

The benefits of the HAFA short sale include:

• Release from liability to remaining mortgage debt after the closing of the short sale
• The mortgage company works with the seller and the agent to determine an acceptable selling price.
• $3000 in relocation assistance to the resident of the property (owner or tenant)
• The first lien holder will offer the junior lien holder(s) up to $8500.
• HAFA has new credit reporting features, which allow it to have a lesser impact on your credit than a conventional short sale or foreclosure.

Second Lien Holders Receive Up to $8500

The agent in the article I read was confused because the first was only offering the junior lien holder something less than $8500. This agent felt that the lender did not understand the HAFA Guidelines.

Unfortunately, HAFA guidelines clearly state that the second will be offered an amount up to $8500. In this case, it appears that the second was not being very accommodating.

A Few Tips for Working HAFA Short Sales

When working on your next HAFA short sale, here are a few other things to consider:

Submit short sale packages to all lien holders at the same time. It is a best practice in short sale negotiating and processing to submit short sale packages to all lien holders at the same time. Since short sale processing time frames are often a mystery and can be lengthy, it is best to get the short sale package in line for review as early as possible. If you learn in the midst of the short sale processing of a change, than new settlement statements and/or contracts can be submitted during the short sale process.

Only mortgage loans need apply. While the HAFA program is set to pay up to $8500 to junior lien holders, this means $8500 for other mortgages. What this does not mean is that the $8500 can be applied to the seller’s unpaid HOA or water bill. This money also cannot be applied to an IRS Tax Lien or any other lien that is not a mortgage. So, if your short sale listing has some of these other liens, you will need to make a plan (and start early) to get those liens removed prior to closing.

Short sales are tricky and not for the faint of heart. The agent ranting on the Internet may have lots more details about her HAFA short sale that were not at my disposal. But, as you can see, there are a lot of criteria to consider when processing a short sale. Each short sale situation is as unique—just as all fingerprints are different and no two snowflakes are the same.