San Jose Short Sale Agent: Silicon Valley Foreclosure Prevention Specialists

The Federal Government is attempting to streamline the short sale process.  Yesterday,  April 5,2010, HAFA (Home Affordable Foreclosure Alternatives) Program went live.

The days of being at the mercy of the whimsical and capricious attitudes of the lenders are behind us now, at least  for those lender who have agreed to take part of this historic effort. There is now financial incentive for the lenders and the borrower/sellers as well to participate and help resolve the foreclosure crisis which is still looming before us.

As discussed briefly in the previous post , HAFA is the new Federal Government’s Program designed to complement the loan modification Program (HAMP), to help those borrowers who cannot qualify for said loan modification efforts.   Below is a bit more detail in a FAQ format.

What does HAFA stand for?
Also known as the “April Program”, HAFA stands or Home Affordable Foreclosure Alternatives. It’s a brand-new government program starting on April 5, 2010 that will streamline and incentivize alternatives to foreclosure. Under HAFA, participating banks must work with you to help you avoid foreclosure.

What are the “Alternatives” in HAFA?
HAFA provides two alternatives that will allow you to avoid foreclosure:

• Short Sale – If you owe more on your home than it is now worth, a short sale will help you sell your home and save yourself from financial ruin. According to HAFA, a real estate agent must be involved in this process. Agents with the CDPE designation are specially trained to help you with a short sale.
• Deed-In-Lieu – This is where the bank accepts the deed of your home instead of (“in-lieu of”) foreclosure. You do not get to keep your home, but your mortgage debt is forgiven.

HAFA also provides up to $3,000 in Borrower Relocation Assistance to help you transition beyond a short sale or deed-in-lieu of foreclosure.

Why should I consider a HAFA short sale?
HAFA sets distinct guidelines and incentives for banks and lending companies so that you will know whether or not you can complete a short sale. One of the common myths about short sales is that they take forever to complete. HAFA makes sure that short sales happen more quickly by streamlining the short sale process.

How is HAFA different from a short sale?
The main issue with traditional short sales was that they took too long, and it was difficult to keep buyers interested in the process. HAFA is a program designed to speed up the short sale process and even gives banks incentives for each short sale they do. Also, after completing a HAFA short sale, you may be given up to $3,000 in Borrower Relocation Assistance to help you transition. During a non-HAFA short sale, there is no government incentive for banks to help you.

Do I have to hire a real estate professional for a HAFA short sale?
Yes, but it doesn’t cost you anything. HAFA pays the real estate professional’s fees. It is a requirement of a HAFA short sale that you work with a real estate professional to help you through the process. CDPE-designated agents understand this process, and are located throughout the country. Find a CDPE in your area today to help you get started.

How do I get started?
Your first step should be to contact an educated real estate professional in your area. An agent can walk you through the HAFA process, determine your eligibility, and provide you with the best solutions available for your particular circumstances.

How do I qualify?
Most homeowners facing financial hardship can qualify for HAFA. If you applied for a HAMP Trial Period Plan but did not qualify, or were unable to complete the Trial Period Plan, you are definitely eligible for HAFA. If you are unsure about your situation, contact a CDPE in your area immediately.

What’s in it for me?
HAFA is the only program that gives you cash for avoiding foreclosure through a short sale or deed-in-lieu of foreclosure. If you complete a short sale or deed-in-lieu, then up to $3,000 in Borrower Relocation Assistance may be available to aid in your transition. This program seeks to ensure that no one will be left high-and-dry if they cannot afford their home. The biggest gain of HAFA, however, is that it helps you get your life back if you feel like there are no other solutions when faced with foreclosure.

How long does the process take?
HAFA speeds up the short sale process by putting in place distinct timelines that the banks—and you—must follow. Each step of the process has a defined amount of days in which it must happen. This keeps everyone on track. The longest possible time allowed in the HAFA short sale process is four months.

What is the April Program?
HAFA is commonly referred to as the April Program.

HAFA Scams
There are many people out there trying to scam homeowners by requesting up-front fees for HAFA short sales. This is fraud. A CDPE-designated agent will never ask you for money. MakingHomeAffordable.gov(MHA) provides the following guidelines:

• Beware of anyone who asks you to pay a fee in exchange for counseling service or modification of a delinquent loan.
• Scam artists often target homeowners who are struggling to meet their mortgage commitment or anxious to sell their homes.
• Beware of people who pressure you to sign papers immediately, or who try to convince you that they can “save” your home if you sign paperwork or transfer over the deed to your house.
• Never make a mortgage payment to anyone other than your mortgage company without their approval.
• Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.

Who is Eligible for HAFA?

Most homeowners in facing financial hardship are eligible. As a rule, if a homeowner is eligible for HAMP but cannot pay the mortgage, then he or she is eligible for an assisted short sale through HAFA. However, loans owned or guaranteed through Fannie Mae or Freddie Mac do not qualify. Servicers must consider possible HAMP eligible borrowers for HAFA within 30 calendar days if the borrower has one or more of the following criteria :

• Does not qualify for a HAMP Trial Period Plan
• Does not successfully complete a HAMP Trial Period Plan
• Is delinquent on a HAMP modification by missing at least two consecutive payments
• Requests a short sale or deed-in-lieu

For a loan to qualify, it must meet the following criteria:

• The property is the borrower’s principal residence
• The mortgage loan is a first lien mortgage originated on or before January 1, 2009
• The mortgage is delinquent or default is reasonably foreseeable
• The current unpaid principal balance is equal to or less than $729,750
• The borrower’s total monthly mortgage payment (as defined in Supplemental Directive 09-01) exceeds 31 percent of the borrower’s gross income
• The mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac

Part 3 of 3  Which Banks are supporting HAFA?

HAFA, HAFA, HAFA.  What is it exactly and why are so many people talking about it and why is April 5, 2010 an important date?

For those who have been following the foreclosure prevention solutions like  loan modification and short sales, this  a critical program which will impact their lives in a major way.  This is the Federal Government’s effort into stream lining and standardizing the short sale process for those borrowers who do not qualify for loan modifications through the HAMP  program. The Treasury is obviously concerned about the proliferation of distressed properties in the real estate market and how they affect the overall health of the economy.  April 5, 2010 is when HAFA goes online.

Remember, short sales that do not successfully get approved  end up on the auction block and if they are not sold there, turn up as the neighborhood eye sore in the form of an REO (Bank owned) properties.   If you are a homeowner, the last thing you want is for an REO to turn up on your block as it will set the bottom range of your home price.   Both Short Sales and REOs negatively impact your neighborhood prices, but  short sales often fetch higher selling prices because they typically have homeowners living there and taking care of the  property which means they show better and are in better condition than REOs; the latter are vacant and many times have been vandalized by the homeowners.   REOs are like the black sheeps of the  family that no one will invite to the party.   Everyone’s collective goal is to prevent more REOs from hitting the real estate market.

What is HAFA?

The Home Affordable Foreclosure Alternatives (HAFA) Program is a government-sponsored initiative led by the US Treasury Department assisting all Home Affordable Modification Program (HAMP)-eligible homeowners in avoiding foreclosure, specifically through short sales or deeds-in-lieu. First introduced November 30, 2009 in Supplemental Directive 09-09 as part of HAMP, HAFA assists eligible homeowners in quickly and effectively implementing short sales by providing financial incentives to lenders that work in conjunction with HAMP to assist homeowners in need. The program was introduced in part with the intent to remove the stigma from short sales and help keep communities from being destroyed through massive foreclosures. HAFA in its current state is only applicable to conventional-type, non-Governmental Serviced Enterprises (non-GSE) mortgages and therefore does not apply to loans owned or guaranteed with Fannie Mae or Freddie Mac. These organizations may have plans to release their own versions of HAFA.

Details of HAFA

HAFA was introduced to simplify and streamline the short sale process. HAFA accomplishes this in the following ways:

• Compliments HAMP by providing viable alternatives for borrowers who are HAMP-eligible
• Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis
• Allows the borrower to receive pre-approved short sale terms prior to the property listing
• Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement
• Requires that borrowers be fully released from future liability for the debt
• Uses standard processes, documents and timeframes
• Provides financial incentives to borrowers, servicers and investors

HAFA provides financial incentives as follows:

• Financial incentives for lenders participating in the program include up to $6,000 (updated March 26, 2010; was previously $3,000) servicing bonus upon completion of a short sale or deed-in-lieu
• Homeowners qualify for $3,000 (updated March 26, 2010; was previously $1,500) in Borrower Relocation Assistance after a short sale or deed-in-lieu has been executed (may classify as taxable income in some cases
• Lenders pay all servicing fees — homeowners suffer zero out-of-pocket expenses

Part 2 of 3 – Who is eligible for HAFA

“What is your plan?” When I ask this question, the typical response is something in the order of:  “What plan?  I didn’t know you needed one.”

I ask this question of my buyers who want to get that “deal” and I also ask that of my sellers who want to sell quickly with no hassle and get top dollars.   I use the analogy that a real estate related plan is like having a well platted map before going on a long trip (the analogy still works in this day of the GPS).  You may eventually get there, but if you have a well organized plan or a map, you can save tremendous amounts of time, money and heartache and give yourself the opportunity to enjoy the trip rather than wasting time sweating the details on the fly.  In Real Estate, you don’t get that deal or you don’t get that multiple offer scenario by accident; there is always lots of work done beforehand.

Most of us would not consider taking our family to Disneyland or Legoland or wherever our destination is, without having some sort of itinerary.   Yet, in these difficult times, when it is now so common for homeowners to be struggling to make their mortgage payments and who are facing the very real possibility of foreclosures, homeowners try to “wing it” and approach this very long and arduous trip without any sort of planning or assistance.  Almost hoping that foreclosure can be avoided by accident or hoping to talk to someone who will understand and sympathize with their plight and make things stop.  Unfortunately, that rarely happens.

Foreclosure is a process driven activity, which means activities are laid out in sequential order.  In order to successfully fight a foreclosure, you must understand the process and have a plan to fight the lender and stop the sequence so the final step – foreclosure – is not achieved.

Fighting foreclosure is not something I can write about in a few paragraphs in this blog; as you can imagine, it is much more complex and the situations and hardships differ from homeowner to homeowner.  However, I do have a report here which will explain simply and provide information so that the distressed home owner can take action to stop the foreclosure process and learn about the foreclosure prevention options that are available to them.  Some sort of action must take place; inaction will not stop, but in most cases will accelerate the foreclosure process.

Click for the story

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.