HAFA (Home Affordable Foreclosure Alternatives)
It’s about time!
Those of us who specialize in short sales obviously know, believe and have been evangelizing about the fact that short sales not only help the homeowners but the lending institutions as well. Unfortunately, there is a lot of misconception and misinformation floating about out there (especially on the internet by unenlightened, so-called “authorities”) who try to contradict these facts and – for whatever reason – plant seeds of doubt in confused homeowners’ minds. Unfortunately these doubts germinate into inaction and often end up denying a perfectly viable alternative (inaction leading to foreclosure) to distressed homeowners who need them most, out of their difficult situations.
Now the Treasury has finally taken a position and set things straight with HAFA (Home Affordable Foreclosure Alternatives): short sales are better for homeowners than foreclosures because: 1) they preserve the homeowner’s credit rating, especially in obtaining Fannie Mae loans in a much quicker manner and 2) they are also better for the lending institutions because the former typically gets higher prices than foreclosed properties. These are truly win-win situations for the homeowners and lenders and that is precisely why the Treasury is pushing to make them easier to complete if a loan modification is not viable.
This program tries to address a lot of what is wrong with the short sale process, however, in my opinion, it addresses the single biggest enemy of short sale practitioners: the dreadfully drawn out approval process by many lenders. (Although prior to HAFA, some lenders decided on their own to streamline the approval process.) It is not uncommon for the approval process to take 3+ months due to a combination of inadequate staffing and simple bureaucracy. It will be manna from heaven to reduce the approval timeframe to only 10 days, as opposed to months. Short Sales get a bad reputation because buyers often walk out of a deal because they are simply tired of waiting for the lender approvals and buy different, unencumbered properties. An approval or denial within 10 days will save many, many short sale deals and give the distressed homeowners dignified resolutions to their financial ordeals.
Granted, HAFA, like HAMP (Home Affordable Modification Program) cannot be forced on the lenders, but at least it will lend political and social pressures on these mega-lending institutions which have been given so much assistance during their difficult times by the Treasury. This is definitely something in the right direction in addressing our foreclosure fiasco by the Obama Administration.
