On March 9, 2012, changes were made to the MHA (Making Homes Affordable Program) otherwise referred as President Obama’s Foreclosure Assistance Program. HAFA (Home Affordable Foreclosure Alternatives) is a subset of the above program designed specifically to handle short sales.
There were many changes to the MHA, but we will be focusing on some of the exciting changes to the HAFA portion of the program.
Some of the changes which will impact home sellers are:
- Program end date to be extended out to December 31, 2013
- $3,000 relocation assistance to owners who live at the property or tenants occupied properties. Servicer is required to verify occupancy.
- Secondary lien holders payout has been increased from $6,000 to $8,500
- Credit Bureau recording will now be required as either code 13 ( paid or closed/0 balance) or 65 (paid in full/foreclosure was started), whereas there were no such guidance before
The most significant change, in my opinion, is the extension of the HAFA program for another full calendar year. HAFA is a highly successful program and its use is increasing on daily basis; and the program has played a major role in giving structure and creating for the first time a national guideline for the entire short sale process.
The fact that the second lien holders will be getting an increase in the payout limit from $6,000 to $8,500 is another component which will make the bitter pill a little easier for the second lien holders. An additional $2,500 to the second will make it easier and will permit greater numbers of short sales to close.
There used to be an occupancy requirement where the owner had to live in the property within 12 months, and only the homeowner was able to receive the $3,000 relocation incentive. The update now permits the payment of the relocation incentive to the party which needs to vacate. So this now means that the tenant can receive the $3,000 incentive instead of the homeowner. For the first time, this change gives the tenant a financial incentive which was not available before. Now tenants can earn money to cooperate in showings and work with everyone else to see the short sale close, rather than stand in the way.
For those homeowners whose primary concerns are about saving their credit scores, they can continue to pay their full mortgage payments to prevent late payments from showing up on their credit history. The second component is a uniform reporting requirement to the credit bureaus. The update makes the reporting simple by offering 2 options to insure that the reporting will be done in a timely and proper manner.