Short Sale Blog

Here is the latest short sale news at Seattle Short Sales. We assist hundreds of Seattle area homeowners with short selling their home and avoiding foreclosure.

Recent HAFA Changes Bring it and Freddie Mac's "Standard Short Sale" Programs Closer

- Monday, March 17, 2014

Changes to the Home Affordable Foreclosure Alternatives (HAFA) Short Sale Program (HAFA), which took effect on February 1st this year, bring HAFA in line with the other main government short sale program, Freddie Mac’s “Standard Short Sale.”  Freddie’s Standard Short Sale guidelines apply to mortgage loans where the investor is one of the GSE’s: Freddie Mac or Fannie Mae. The HAFA program is for non-GSE mortgage loans (provided that the homeowner meets the HAFA eligibility requirements).

The aim of the HAFA changes is to make the whole short sale process faster and easier, by reducing the amount of paperwork and by providing guidelines for timing. The recent changes to HAFA are outlined in HAFA Supplemental Directive 12-07.  Key changes to HAFA are:

  • A Short Sale Agreement (SSA), signed and returned by the borrower, is no longer required. It is replaced by a Short Sale Notice (SSN), which does not require the borrower’s signature.
  • The Request for Approval of Short Sale (RASS) and Alternative Request for Approval of Short Sale (ARASS) are also eliminated, and are replaced by the Acknowledgement of Request of Short Sale (ARSS), which no longer requires the borrower’s signature.
  • In most cases, servicers are required to make a decision on the borrower’s HAFA request within 30 days of receiving all required documents.
  • Treasury now requires both the seller and the purchaser to sign an arm’s-length transaction agreement, and an affidavit that affirms that no money is being exchanged that does not appear on the HUD-1 form.
  • The property may not be resold at all for 30 days after closing of the HAFA short sale, and it may not be resold for more than 120% of the short sale purchase price for 90 days after the HAFA short sale.

The changes over the past six months, both to the Freddie Mac/Fannie Mae short sale guidelines and to  HAFA, mean that the short sale process (requirements, guidelines, timelines) are nearly identical for these government short sale programs, regardless of who the investor on the loan is.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: 

You can also contact Lambros Politis on Google+ or to find more up to date information on this subject, go to the Ark Law Group Blog. 

Washington State Short Sale Seller Advisory

Ross Kilburn - Friday, December 10, 2010
The Washington Department of Financial Institutions and the Washington Department of Licensing have issued a consumer publication called the Short Sale Seller Advisory.

It offers basic instructions to homeowners regarding some of the pitfalls of short sales and the various scams that exist. In short, the Advisory attempts to lay out the major issues facing a homeowner who is considering a short sale. In the end, the main directive is to seek competent, professional help.

The main topics of the Washington State Short Sale Seller Advisory are:

Before Proceeding With a Short Sale:
  • Understand the options of a lien holder after borrower default
  • Watch out for predatory rescue scams
  • Contact a HUD counselor
  • Make yourself available to free Washington State resources
  • Obtain legal and tax advice
Short Sale Considerations:
  • The need to understand deficiencies
  • The need to understand the tax consequences
  • Use a qualified real estate professional
  • Investigate documentation and eligibility
  • Determine the amount owed on the property
  • Determine the estimated fair market value on the property
  • Be aware of the impact on your credit score
  • Understand there may be a waiting period before buying another home
Other Options:
  • Loan Workout
  • Loan Modification
  • Refinance
  • Deed-in-Lieu of Foreclosure
  • Work out sale
  • Bankruptcy
  • Foreclosure
Click here to download a copy of the Washington State Short Sale Seller Advisory

Just Released: The Homeowner's Guide to U.S. Government Short Sale Programs

Ross Kilburn - Tuesday, November 09, 2010
Seattle Short Sales, Inc. has just released The Homeowner's Guide to the U.S. Government Short Sale Programs. This guide covers the FHA, VA, HAFA, Freddie Mac, and Fannie Mae short sale programs. This is the most comprehensive guidebook available to homeowners and is available at no cost. This guidebook shows homeowners how to get their short sale approved in the fastest time possible.

This 40-page resource details the exact steps for getting a short sale approved through each government program. It covers eligibility, incentives, and settlement costs for each program. Included are discussion points, important things to know, and a helpful resource list.

The guidebook is published as a PDF, and can be downloaded by clicking here: The Homeowner's Guide to the U.S. Government Short Sale Programs.

If you are a homeowner, and would like to learn more about short selling your home, please go to:

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to:

Short Sales Will Continue to Grow as REO Shadow Inventory Brings Further Home Price Drops

- Monday, September 20, 2010

Approximately 2.5 million American homes are currently under foreclosure, and another 2.5 million homeowners are more than 90 days delinquent on their mortgages and likely to face foreclosure, according to a report released last week by John Burns Real Estate Consulting.

According to the report, about 562,000 homes are currently Real-Estate Owned (REO). They form a “shadow inventory” of homes for sale - an inventory that is sure to rise as the current glut of real estate, a total of 5 million homes that are either under foreclosure or likely to face foreclosure, hits the market.

The Burns report predicts that this REO inventory will affect home prices in two main ways:
1. It creates a more-than-one-year supply of homes on the market. Simple laws of supply and demand mean that prices will likely drop.
2. Banks are more likely to drop prices on bank-owned homes in order to ensure a quick sale, which will negatively affect home prices throughout the region.

Many analysts attribute the increase in foreclosures to the failure of the loan-modification program. While loan modifications have seen better performances through the first quarter of 2010, with less than 10% of loans processed through the program becoming more than 60-day delinquent through that period (data from FHFA 2Q2010 report), for many homeowners loan modifications have only delayed their path to foreclosure, leading to the recent rise in foreclosure starts.

Aside from the specter of a growing REO inventory of homes for sale, factors external to the real estate market itself may also bring home prices down, such as: greater levels of unemployment, and rising interest rates. Just how much home prices could fall depends upon local market conditions; the Seattle market, for example, is one that is currently considered overvalued and so has the potential to drop more.

More and more homeowners are working to avoid foreclosure by taking preventative action. Where market conditions have forced homeowners into a negative equity situation, rather than waiting for foreclosure, an increasing number of homeowners are choosing to short sale their home.

A short sale is a loss mitigation measure; the homeowner negotiates a discount on the amount owing to the bank, and pays off that amount to relieve himself or herself of the loan. In markets that have the potential for further declines, it is a strategy for the homeowner to escape the risk of even further losses. Short sales are one of the fastest-growing categories of foreclosure-prevention actions, having grown from 11,700 in the second quarter of 2009 to 29,400 in the same quarter this year. The Burns report predicts that short sales will continue to grow, as homeowners strategize in order to protect themselves from further losses due to continued home price declines.

If you are a homeowner, and would like to learn more about short selling your home, please go to:

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to:

HAP Homeowners Assistance Program: An Option for Military Homeowners with Negative Home Equity

- Monday, September 20, 2010

The Department of Defense’s Homeowner’s Assistance Program (HAP) was originally designed for members of the American military who are affected by Base Realignment and Closure (BRAC). Announcement of a base closure could cause a drop in local house prices, forcing military members to take a loss on their home sale. The HAP program is authorized in Section 1013 of the Demonstration Cities and Metropolitan Development Act of 1966 (as amended), to provide financial assistance to eligible federal personnel - including military, Coast Guard, and some civilian - who are faced with losses on the sale of their home as a result of a BRAC move.

The government’s economic stimulus package, through the American Recovery and Reinvestment Act of 2009, modified the plan to what is known as “Expanded HAP”. The new “Expanded HAP” makes more military members and civilians eligible for assistance by including those undergoing a Permanent Change of Station (PCS) move. It also removes the requirement to prove that the house price decline was a result of the BRAC announcement.

The HAP program helps military members to sell their home and make their move, without having to go to their lenders to try to have a short sale approved.

The new Expanded HAP program is open to:
- Wounded members of the Armed Forces (30% or greater disability) and wounded Department of Defense (DoD) and Coast Guard civilian homeowners reassigned in furtherance of medical treatment or rehabilitation or due to medical retirement in connection with their disability,
- Surviving spouses of the fallen,
- Base Realignment and Closure (BRAC) 2005 impacted homeowners relocating during the mortgage crisis, and
- Service member homeowners undergoing Permanent Change of Station (PCS) moves during the mortgage crisis.

Who can apply:
The HAP program is undergoing on-going amendments, as the government works towards finding ways to help distressed military homeowners in the current unpredictable and changing economic climate. It is best to contact HAP directly (contact details below) to get advice specific to individual situations.

General guidelines to qualify for HAP assistance for those applying as a result of a PCS move are:
- they must be active-duty military personnel
- the PCS move must be greater than 50 miles, with PCS orders dated between February 1, 2006, and September 30, 2010 (closing date is subject to availability of funds)
- the home must have been their primary residence at the time the move was announced
- county, parish and city home values must have dropped by at least 10% between July 1, 2006, and the HAP application date; and the individual home value also must have dropped by 10% between the date of purchase and date of sale.

Current regulations are that the home must have been under contract to purchase prior to July 1, 2006. Many military members purchased their homes just after this cut-off date, and an amendment under discussion may open the program to homeowners who purchased after this date.

Guidelines for applicants eligible as Wounded, Injured or Ill and Surviving Spouses are slightly different, e.g. the requirement to purchase the primary residence prior to July 1, 2006 does not apply.

HAP provides assistance to military homeowners faced with selling their home at a loss in a number of different ways. The exact ways that HAP may help depend upon which eligibilty requirements the homeowner applies under. For those who are applying as a result of a PCS move, HAP may help by:
- if foreclosure is taking place, providing financial assistance after foreclosure by paying some of the expenses,
- if a private sale is taking place at a loss, reimbursing 90% of the difference between the purchase price and the sale price, plus closing costs,
- if a home sale cannot be negotiated within 120 days, purchasing the home directly by paying either 75% of the purchase price or by paying out the mortgage, whichever is greater (HAP will not reimburse or pay out second mortgages).

How to apply:
Contact your nearest HAP office or visit the HAP website from application forms. A complete HAP application package must include:
- Form HUD-1 - proof of home purchase
- Proof of ownership - copy of deed
- proof of occupancy at time of receipt of PCS orders (e.g. utility bill)
- proof of program eligibility

Important things to know when applying for HAP:
1. You must be actively marketing your home, and seeking to sell it at Fair Market Value.
2. HAP does not reimburse the full negative value of your property, but a percentage that ranges between 75% and 95% of that negative value.
3. HAP applications are processed in chronological order that the completed applications are received. Incomplete applications will be ignored until all documents are in order, so it is very important to make sure that your application is complete. Order of processing priority is by eligibility: (1) Wounded Injured Ill and Surviving Spouse, (2) BRAC 05 moves, (3) PCS moves.
4. A member may receive benefits only once through this program.
5. As of November, 2009, HAP benefits are no longer taxable.

HAP website:
DoD HAP National Hotline: 1-888-363-4271
General HAP brochure:
Expanded HAP info brochure:
Online discussion forum:

If you are a homeowner, and would like to learn more about short selling your home, please go to:

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to:

The VA Compromise Sale Program: How to Do VA Short Sales

- Monday, August 30, 2010
What is the VA Compromise Sale Program?

The VA Compromise Sale Program is often referred to as the VA Short Sales program. Many homeowners who are looking to sell their homes today are finding that, in the current economic climate, the market value of their home is less than the amount owing on their mortgage. However, if their home loan was financed as a VA Loan, they may be eligible for assistance through the VA Short Sales Program.

VA Loan summary

The VA Loan is a program administered through the Department of Veterans Affairs, available to eligible service persons and veterans to help them to negotiate home loans at more favorable terms than most borrowers would have access to.  

VA does not provide the funds; the mortgage is still issued through a private bank, like any other mortgage. But VA provides a loan guaranty to the lender, promising to pay a specific amount to the lender in case they are unable to continue making payments on their loan. They do not guarantee the entire value of the loan, but a percentage. This can range from 50% on loans up to $45,000 (i.e. maximum $22,500), to between 25% and 50% of loans up to $144,000, and up to 25% of the Freddie Mac conforming loan limit on loans over $144,000.

The maximum amount that VA will guarantee a loan for is called the “entitlement.”  It is like an insurance policy for the bank. Active-duty service persons can qualify for entitlement. The amount of entitlement that a service person is eligible to receive can be found on their Certificate of Eligibility, available from VA.

The advantage of getting a home loan through the VA program is that borrowers receive much more favorable mortgage terms. Since the bank receives the loan guaranty from VA, borrowers can negotiate a loan with little or no money down - even a deposit of 0% - and receive lower interest rates.

Why would a homeowner choose to proceed with a VA Short Sale?

Sometimes, circumstances force the sale of a home at a lower sale price than the original purchase price. For members of the military, reasons to sell a home at a loss might be because of a permanent change of station, or a change in marital status.

If the home was purchased with a VA Home Loan, the seller might be eligible for the VA Compromise Sale Program. If an offer to purchase is received that is less than the amount owing on the home loan, the homeowner can send a request to VA to undertake a “compromise sale” (or short sale). If VA approves the sale, they will pay the lender the difference between the purchase price and the amount owing on the VA mortgage, up to the amount that they guaranteed on the original home loan.

In a regular short sale, the homeowner is dependent upon the lender agreeing to take a financial loss - absorbing the difference between the amount owing on the mortgage and the sale price of the house - in order for the homeowner to rid themselves of a mortgage that they no longer can service. If the lender does not approve the short sale, it cannot go ahead. The advantage of a VA Compromise Sale or Short Sale is that VA takes some or all of the loss, through their loan guaranty, making it much more likely that the lender will approve the short sale.

Eligibility requirements:

The VA Compromise Sale program is for homeowners who have already received a purchase offer on their home that falls short of the amount owing on their mortgage, and whose mortgage was negotiated through the VA Home Loan program.

In order to qualify for the program:
- the seller must demonstrate financial hardship
- the home must be sold at fair market value based upon current market conditions
- there must be no second lien or other lien on the home, unless the value of that lien is deemed by VA to be “insignificant” (In situations whereby there are second liens or other liens, the seller can request that the lien-holder consider releasing the lien and converting the loan to a personal loan.)
- closing costs for the sale must be considered “typical” for such a sale
- the compromise sale must be less costly to the government than foreclosure would be
- the borrower must provide a statement explaining why they must sell the property
- a VA appraisal will be required
- on loans that originated on or before December 31, 1989, the seller must be willing to sign a promissory note and enter into a payment plan to compensate VA for a portion of the compromise claim payment.

To protect the seller’s interest, the seller should make the sales contract subject to the approval of a VA compromise sale.


The homeowner must first receive a purchase offer, at current fair market value, that is lower than the amount owing on the mortgage. Once this offer has been received:

1. Find out if your lender has a Loss Mitigation Department that has been authorized by VA to process a VA compromise sale. You can find an up-to-date list of authorized lenders here or you can contact your lender to ask them.

2. If your lender does have a VA-authorized Loss Mitigation Department, contact them directly for the forms. If they do not, then contact your regional VA office for forms.

3. Fill out a financial status report form, provided by your lender or the VA. You can download the form here.

4. Complete a letter of request.

5. Complete a Compromise Agreement Sale Application form, provided by your lender or the VA.

VA will then work with your lender and review the application. If they approve the short sale, VA will pay the lender the difference between the mortgage balance and the proceeds of the sale - up to the value that the VA Loan was guaranteed for.

When VA pays the lender the difference between the sales price and the total debt, the portion of the homeowner’s entitlement used to guarantee the loan will remain tied up until VA is reimbursed in full.

Further information:

Updated list of VA-authorized lenders:
If your lender is not on this list, VA will process the Compromise Sale/Short Sale directly.

Regional loan centers contact information:

More information (pdf document): Sale Program.pdf

VA Compromise Sale Program - Info for Real Estate Professionals:

If you are a homeowner, and would like to learn more about short selling your home, please go to:

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to:

Freddie Mac Encourages Short Sales For Distressed Homeowners

Ross Kilburn - Wednesday, June 30, 2010
Freddie Mac CEO, Ed Haldeman released a statement today on "Why Foreclosure Prevention is a National Priority." He states that while the overwhelming majority of borrowers are current on their mortgages, that since the start of the recession that over three million homeowners have lost their homes to foreclosure, and that over five million are still currently at risk.

While Freddie Mac would like to find ways to help homeowners stay in their homes, they recognize that in many cases it is not financially feasible to make that happen. The typical reasons why a homeowner doesn't qualify for a workout plan is when they are struggling with a job loss, curtailment of income, a health issue, or simply bought more house than they can afford.

In those situations, Freddie Mac has found that the best scenario for the homeowner is to find a graceful exit from homeownership. Solutions such as short sales are recommended by Freddie Mac as they help homeowners avoid the stigma of foreclosure, shorten the waiting period before they can buy another home, and may inflict less damage on the individual's credit report. Freddie Mac reports that short sales are up by 600% from 2008.

New Fannie Mae Rule Targets Strategic Defaulters

Ross Kilburn - Thursday, June 24, 2010
Fannie Mae, in an effort to reduce the amount of 'strategic defaults' has issued new underwriting guidelines meant to punish those homeowners who walk away from a mortgage, even when they have the ability to pay it.

Researchers have stated that the main motivation to walk away from a mortgage is when there is negative equity. According to real estate research firm CoreLogic, about 11.3 million homeowners are underwater on their mortgages. Around 2.3 million additional homeowners are very close to being underwater. All told, almost one-third of all U.S. homeowners are either underwater or are close to it. CoreLogic projects that the typical underwater homeowner will not return to a position of positive equity until 2015 or 2016 at the earliest.

Fannie Mae is targeting homeowners who let their house go to foreclosure without evidence of a hardship or a good-faith attempt at a workout alternative. The penalty that Fannie Mae is implementing is two-fold. First, they have declared that strategic defaulters will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Secondly, they are vowing to aggressively pursue deficiencies in states that allow them to do so.

In order to encourage workouts, Fannie Mae, in April 2010, issued a revised underwriting bulletin, found here, that encourages homeowners to seek foreclosure alternatives such as short sales, by making the homeowner eligible for a new Fannie Mae backed loan in as little as two years. Compared to the waiting period of seven years post-foreclosure, it is clearly an advantage to pursue alternatives to foreclosure.

Let's take an example of a borrower who is underwater. Here at Seattle Short Sales, Inc. we work with hundreds of local homeowners, and can draw on a mountain of recent statistics. You can see all of the short sale approval letters here. On average, when the home is sold, the debt discounted is over $100,000 on an average property.

In our example, the homeowner previously purchased the property for $350,000 four years ago. The homeowner has a mortgage payment that is over $1,000 more than a rental payment would be for a suitable, alternative dwelling. If it takes until 2016 to regain their lost equity, that would mean they are making 84 housing payments for a $1,000 more than necessary, with nothing to show for it in the end. $84,000 put into the pocket of a homeowner in only six years is the reason why people voluntarily default.

Now, in Washington State, if the house goes to a Trustee Sale, the foreclosing senior lien holder, in most cases will not have a right to pursue the borrower for a deficiency. The junior non-foreclosing lien holder does retain the right. So, if the homeowner only has one mortgage, then there is a good chance that they could completely walk away unscathed, except for the restriction in using Fannie Mae money for the next seven years. If they have a junior lien, then the situation is more complicated.

In all cases, the homeowner will want to consult with a real estate and bankruptcy attorney to assess their options and compare the pros and cons of the situation.

Homeowners Paid to Sell Home at a Loss

Ross Kilburn - Monday, March 15, 2010
Responding to concerns that homeowners are not finding relief through loan modification efforts, the federal government is rolling out a new short sale incentive program on April 5th.

At the heart of the program are incentives and cash payments, directed at the loan servicers, junior lien holders, and homeowners. The loan servicer will now receive $1,000 for a short sale, up to $3,000 is available to the junior lien holder, and $1,500 is available for homeowners, for 'relocation assistance.'

The program is not without challenges and potential large problems that will hold is back from being truly effective.

First, the program is voluntary. While loan servicers might be more open to processing short sales, due to the financial incentive, the final approval for a short sale transaction is still made by the investor who owns the loan.

Second, the junior lien holders can kill a deal if they want more money than the $3,000 that is allocated to them. At Seattle Short Sales, we find that here in the Seattle area, many homeowners have HELOCs and seconds with balances of $75,000-$100,000. Typically, those lenders are asking for 10% or more of the principal balance, in order to release the lien. So, in many cases we may see a situation where the lien holder wants $4,000-$15,000 more than they are being allowed by the foreclosing first lien holder.

Third, in the federal short sale program, the junior lien holder is instructed to release the borrower from any deficiency balance. I don't see that happening in any great scale. If a lender is holding a $100,000 HELOC note, it is highly doubtful that three thousand dollars will compel them to give up the rights to collect $97,000. In Washington state, in a trustee sale, only the foreclosing senior lien holder loses their deficiency rights. The junior lien holder retains their deficiency rights. And, we have found, in the short sale approval letters granted by junior lien holders, they typically retain their deficiency rights.

So, there is some good news to the new federal short sale program. Homeowners may receive a payment, and some lenders will be compelled to approve more short sales.

In the end, in order to get junior liens released, it will be back to the grindstone for short sale negotiation companies. The use of creative deal structuring where the buyer brings in additional funds to contribute towards the excess demands of junior lien holders will continue to be very important.

New DOL Short Sale Rules

Ross Kilburn - Thursday, January 07, 2010
If you haven't heard, the Washington State Department of Licensing is implementing a whole raft of new rules, effective July 1, 2010. The one that effects our little niche is that short sale negotiators will need to be licensed real estate agents.

I think that is good news.

There are still a lot of option-contract short sale flippers in the business who would benefit from a little more regulation and scrutiny.

In our office, all staff members already are agents, or in the process of getting their license.

And, in other news...

On Thursday, January 14 we will have our next short sale training webinar. We closed 7 short sales in December and want to share with you exactly what is working right now to get deals closed. We will also be covering the new HAFA program, how to get pre-approvals from lenders, how to do a bpo, how to respond to excess junior lien holder demands, and negotiating deficiency judgments, among a billion other little topics.

The goal of the webinar is to empower you to become the trusted short sale advisor for your clients and showing you how to draw on our resources and firepower to successfully negotiate all of your short sales. Pre-registration required.

Please download the new paperwork as the previous WFA DocPac is no longer valid. Either go to and download a copy or click this link and it should automatically download:

We build an exclusive "Notice of Default" list on a daily basis that is available for you to use in your marketing. It is a custom list that isn't available anywhere else. The names appear on the list about 30 days prior to them becoming publicly available on the "Notice of Trustee Sale" list. Click here to download a sample.

I look forward to working with you in 2010. It's going to be a great year where we are going to help tremendous amounts of people settle their accounts and get a positive, fresh-start.

To your success,

Ross Kilburn
Seattle Short Sales, Inc.
425-444-3833 (direct)
800-603-3525 (office)
888-860-1314 (fax)

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