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

Seattle Short Sales - 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: http://seattleshortsales.com/homeowners/ 

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. 


Cash Incentives and Relocation Assistance for Short Sales: A Guide to Government and Lender Programs

Seattle Short Sales - Wednesday, February 20, 2013

Only a few years ago, struggling homeowners who wanted to get out of their underwater mortgages had a tough time convincing their lenders to approve a short sale. However, things have turned around completely since then. Lenders now realize that, in most cases, approving a short sale costs them far less than pushing the homeowner into foreclosure. In fact, many lenders are now actually paying borrowers cash - as incentive payments or relocation payments - for completing a short sale!

There is a lot of information about the various government short sale incentive programs out there. But it's harder to find information about cash incentive progams run by the banks, and some people may be wondering if the stories they have heard, for example of cash payments of $20,000 or more to underwater homeowners, are true.

Well, they are! We have worked directly with most of these programs, and they really do exist! Here is a brief overview of the various government and lender programs that pay cash incentives, as well as samples of real approval letters that we have obtained, to show exactly how much cash was paid to each homeowner for completing their short sale:

Government Programs:

FHA Pre-foreclosure Sale Program: If the loan is FHA-insured and the short sale is approved, HUD will pay the borrower between $750 and $1000 towards relocation costs.

This Maple Valley homeowner received $1000 towards relocation on his FHA short sale: 6.23.12 - MetLife - 1st Lien - 79k Deficiency - Debt Settled - Short Sale Approval

VA Compromise Sale Program: If the loan is VA-insured, VA will pay up to $1500 in relocation assistance to borrowers who complete a short sale with a VA compromise claim. This temporary cash incentive program was brought into place in January 2011, and is currently set to expire on December 31, 2013.

This GMAC short sale approval letter for a VA loan allows a Spanaway homeowner $1000 in relocation assistance: 11.16.12 - GMAC - 1st Lien - 92k Deficiency - Debt Settled - Short Sale Approval

HAFA: Short sales that are processed through the federal government’s HAFA program pay a $3,000 cash relocation incentive to the seller. If the home is not owner-occupied, the payment goes to the occupant, not the owner. The incentive is not paid if the home is unoccupied.

This Sammamish homeowner received $3,000 in relocation assistance by processing her Wells Fargo short sale through the HAFA program: 3.14.12 - Wells Fargo - 1st Lien - 146k Deficiency - Debt Settled - Short Sale Approval

FHFA “Standard Short Sale” Program: This new program replaces the HAFA program if the investor is Freddie Mac or Fannie Mae. It also offers up $3,000 in relocation costs to the borrower - but it's important to understand that this amount is a maximum total relocation costs. For example, if the borrower receives other relocation contributions, e.g. from their employer, that amount is subtracted from the $3,000.

Lenders’ In-House Programs:

Bank of America Cooperative Short Sale Program: Available to select homeowners who apply for it before submitting a short sale offer through BofA’s Equator system. Cash incentives to borrowers range from $2,500 to $30,000, and are offered at BofA’s discretion.

This Seattle homeowner received $27,388 in relocation assistance through the B of A Coop program: 12.13.12 - Bank of America - 1st Lien - 110k Deficiency - Debt Settled - Short Sale Approval

This Arlington homeowner received $5,000 in relocation assistance from B of A (incentive itemized on HUD, but not listed in the approval letter): 11.19.12 - Bank of America - 1st Lien - 45k Deficiency - Debt Settled - Short Sale Approval

Wells Fargo: Cash incentives reportedly range from $3,000 to $20,000, and are offered at Wells Fargo’s discretion.

Chase: Cash incentives of up to $35,000 have been offered to select homeowners by invitation from Chase.

This Snohomish homeowner received a $20,000 relocation incentive for doing a short sale of his home: 9.12.12 - Chase - 1st Lien - 105k Deficiency - Debt Settled - Short Sale Approval

And this homeowner received a $25,000 “relocation incentive” for selling his Enumclaw home - even though the home that he sold was a rental! 12.13.12 - Chase - 1st and 2nd Lien - 161k Deficiency - Debt Settled - Short Sale Approval

In some cases, cash incentives may be “doubled up.” For example, a borrower offered a cash incentive from their lender may also be eligible for HAFA’s relocation incentive of $3,000.

This Kirkland homeowner received $2,000 from her lender, Bank of America, in addition to the HAFA $3,000 relocation assistance - for a total of $5,000 in cash for selling her home: 10.26.12 - Bank of America - 1st Lien - 122k Deficiency - Debt Settled - Short Sale Approval

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.

To find out what short sale cash incentive programs you may be eligible for, contact us for a no-obligation, no-fee consultation: http://seattleshortsales.com/homeowners/

Is my Income too High to be Approved for a Short Sale?

Seattle Short Sales - Saturday, August 04, 2012

Many homeowners who are underwater with their mortgages are still employed. Their financial troubles stem from added expenses: caring for elderly relatives, unexpected medical costs, or children starting college, rather than from low income. They may be reluctant to apply for a government short sale program (such as FHA or HAFA) because they are afraid that their income is too high to qualify.

The good news is that neither of the two government short sale programs run by the Department of Housing and Urban Development (HUD) have any income limits for homeowners who are considering a short sale. The two programs are the FHA Pre-Foreclosure Sale Program, and the Home Affordable Foreclosure Alternatives program (HAFA). While you may be able to get your short sale approved outside one of these programs, the advantages of these government short sale programs are:

  • your deficiency balance (the shortfall still owing after paying sales proceeds to your lender) will automatically be waived, and
  • you may be eligible for a cash payment of up to $3000 for relocation assistance.


FHA Pre-Foreclosure Sale Program
The Federal Housing Administration (FHA) is a non-taxpayer-funded division of HUD. Its role is to improve housing standards and loans, particularly by insuring mortgages for home-buyers who might otherwise have difficulty qualifying for a loan.

If your mortgage is insured through FHA, you may be eligible for the FHA Pre-Foreclosure Sale Program.

FHA does not have any upper income limit that might disqualify a struggling homeowner from their short sale program. However, they do have a requirement that the homeowner’s inability to continue to make their mortgage payments must be a result of a change in their financial situation, e.g. either a drop in income, or increased living expenses.

A lender looking to approve a homeowner for a short sale will also run a financial analysis to determine the homeowner’s ability to pay. They add up the homeowner’s total income, and subtract from that the homeowner’s total expenses (mortgage payment, food, bills, other debts). If they calculate that the homeowner can actually continue to afford mortgage payments, they may deny the short sale request and suggest a loan modification.

You can find the complete FHA short sale eligibility requirements here:
HUD Mortgagee Letter 2008-43

HAFA

HAFA is run by HUD as part of the Making Home Affordable program (MHA). As for the FHA program, there is no income limit for homeowners to qualify for a HAFA short sale.

To qualify for a HAFA short sale, homeowners must qualify for HAMP, the Housing Affordable Modification Program. If their income or cash flow is not sufficient to meet the qualifications for a loan modification, they then may apply for a HAFA short sale.

The original HAMP criteria required that the homeowners’ income not be too high relative to their mortgage payments. The monthly payments on their first mortgage had to be more than 31% of their gross monthly income for them to qualify for HAMP (and therefore for HAFA).

For example, if a homeowner’s mortgage payment was $1600/month, and they earned $5000 per month, they would qualify (because their mortgage payment is 32% of their income). But a homeowner with the exact same income, whose monthly mortgage payment was $1200 (or 20%) would not qualify.

However, effective February 2011, changes were made to HAFA eligibility regarding income. The servicer no longer is required to verify that the mortgage payments are more than 31% of the income - but they may implement their own income requirements. In other words, a letter documenting hardship is still required, but each servicer may decide on their own income thresholds.

Although further changes to the HAFA program took effect this past June, they do not include any changes about income requirements.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

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

New Making Home Affordable / HAFA Short Sale Guidelines Now in Effect

Seattle Short Sales - Saturday, June 16, 2012

Changes to the Making Home Affordable (MHA) program, which includes Home Affordable Foreclosure Alternatives (HAFA), that were announced in March took effect at the beginning of this month.

The changes to HAFA affect any distressed homeowner who is considering a short sale of their home. They extend the deadlines for the HAFA program, and they also broaden the eligibility requirements of the program, so that more distressed homeowners may take advantage of the HAFA incentives.

These guidelines apply to non-GSE loans; they do not apply to mortgage loans owned by Freddie Mac or Fannie Mae, to loans guaranteed by VA, or to most loans guaranteed by FHA.

Key changes for the new HAFA guidelines are:

  • The program has been extended. The HAFA short sale must be initiated by December 31, 2013, and the transaction must close before September 30, 2014.
  • Eligibility criteria have been updated. The homeowner no longer needs to be the occupant of the property - although properties that are owned by a business are not eligible to participate.
  • The maximum amount payable to the second lien-holder has increased from $6,000 to $8,500.
  • Relocation assistance of $3,000 will be paid to whoever is the occupant of the property, if not the borrower (e.g., a tenant, legal dependent, parent or grandparent). The borrower is responsible for requesting and managing the relocation assistance.
  • Relocation assistance will not be paid if the property is unoccupied (although there is scope for payments in specific cases, e.g. if a borrower recently occupied the property and was displaced due to military deployment - for details, consult MHA Supplemental Directive 12-02).


These new policies took effect in June 1, 2012 - but they also apply to short sales currently being processed through HAFA that have not yet closed.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

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

The Short Sale Boom Continues: Treasury Considering Changes to Boost HAFA Short Sales

Seattle Short Sales - Tuesday, July 05, 2011

As reported in the HousingWire today, the US Treasury Department is considering further changes to the Home Affordable Foreclosure Alternatives Program (HAFA) aimed at making the program more accessible and boosting both short sales and deeds-in-lieu of foreclosure.

HAFA launched in April, 2009, as a complementary program to HAMP (Home Affordable Modification Program, which was oriented toward loan modifications). HAFA has been modified several times in order to make it more accessible, most recently this past February (see our updates here and here). It appears that these further changes will make HAFA, and therefore short sales, even more accessible to distressed homeowners.

HAMP, in contrast, has been deemed by many as a failure - and recent stats show that loan-mods processed outside of HAMP also have a high rate of re-default, within 12 months. By then, homeowners who have attempted loan modifications may be too far in debt to be considered for programs such as HAFA or other short sale prgrams: they may be stuck with foreclosure.

Meanwhile, as the number of homeowners entering loan-mod programs declines, short sales are growing. The number of short sales processed doubled from 2009 to 2010, and figures for 2011 so far suggest that this year will be even stronger.

With Treasury considering changes to make HAFA more accessible, this is good news for distressed homeowners. Short sales may help many of the homeowners whose loan modification applications were either denied or cancelled, as well as those who are currently struggling to keep up with their monthly payments and worried about foreclosure.

Click here to download our free guide to US government short sale programs, including HAFA.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

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

Insider Info For Homeowners and Agents on Recent Changes to HAFA

Seattle Short Sales - Wednesday, February 23, 2011

Yesterday, we attended the CDPE (Distressed Property Institute) exclusive one-hour online interview with the Laurie Maggiano, Director of Policy in the Office of Homeownership Preservation at the US Treasury. Maggiano also worked for five years as a real estate agent, so she brings an insider’s understanding to issues of homeownership. The interview was conducted by CDPE’s CEO, Alex Charfen. We would like to share some highlights of their conversation.

Background about the HAFA program

HAFA, the Home Affordable Foreclosure Alternatives Program, like HAMP, the Home Affordable Modification Program, is supported by the $700 billion in funds that the US government gave to to the Treasury in 2008 for the Troubled Asset Relief Program, TARP.

HAMP is a program that standardizes procedures for negotiating modifications to mortgages held by distressed homeowners, in the hope that reducing their monthly mortgage payments may allow them to avoid foreclosure and keep their homes. HAFA was set up with the recognition that not every loan could be modified, and that alternatives need to be offered to struggling homeowners. Maggiano explained that the original concept for HAFA was simply to pay servicers an incentive for negotiating a short sale - but that it was soon realized, from feedback that they received, that current short sale programs were not working. Problems included: servicers responding too slowly; servicers changing rules; investors not cooperating; documents not matching up. So the Treasury incorporated feedback from stakeholder groups, including organizations such as NAR (National Association of Realtors) to come up with a program that not only paid financial incentives, but that also provided standardized documents and timelines to the short sale process. HAFA was launched on April 5th, 2009.

Main objectives of HAFA

The aim of HAFA is to make short sales a more viable process to mitigate losses for all parties involved. The objectives of the program are therefore to:

  • Streamline the short sale process by having standardized documents
  • Create clear expectations by all parties (e.g. homeowner, buyer, real estate agent, loan servicer, investor) and clear timelines for everyone’s performance, so that every party knows what their own responsibilities are, and knows what to expect of other parties and when to expect it
  • Prevent losses by making a requirement for servicers to proactively solicit borrowers for the program, rather than wait for a borrower to approach them with a possible buyer and only initiating the HAFA process at that point
  • Provide financial incentives to parties involved, including the loan servicer and the homeowner

Maggiano noted that, while the $3000 cash payment provided to a seller upon successful completion of their short sale is an appreciated incentive, the HAFA requirement that the seller is relieved of any obligation to pay back any deficiency balances owing is the main incentive for sellers - because that enables them to truly get off to a clean start, and to be able to come back into the real estate market sooner.

Changes to HAFA

Maggiano emphasized that the treasury has been open to receiving feedback from all parties on how HAFA works, and to that end made some changes to HAFA earlier this year.

  • Payments to subordinate lien-holders were originally capped at 6% on each loan and a total of $6000 between all subordinate liens. This has been changed by removing the 6% per loan, but leaving the $6000 capped. The reason for this was so that holders of liens that were very small on the scale of the total debt, but that were large for them, could be paid out fairly. For example, if a Homeowners Association was owed $2000, the 6% cap would have meant that maximum that they could receive was $120 - a situation that would have a large impact on a small organization. Now, the other parties have the option of offering more, for example offering $1000 towards the balance owing, or the servicer could even offer to pay them out completely - so there is less chance of a deal being bogged down by a small debt, and there is less impact of the debt on the small organization.
  • Requirements of income qualification have been eased - namely, the requirement that a homeowner’s total monthly mortgage payment exceeds a 31% debt-to-income ratio. Maggiano admits that this is a requirement that followed HAMP qualification requirements, and its original intention was to prove that the borrower truly was experiencing financial hardship. But, from feedback received, it became clear that this requirement was needlessly turning people away from the HAFA program, and that there were other ways to verify financial hardship - so this requirement has been eliminated.
  • There is a “new and improved” escalation process to keep deals from getting bogged down by missed timelines. Servicers are now required to have a dedicated escalation team that is separate from the regular team that makes decisions regarding short sale approvals. There are timelines that servicers must meet, but there is also increased access to officials from the US Treasury, both for homeowners and for agents, to have a case escalated if they believe that a servicer has made a mistake or is causing unnecessary delays.

The Treasury’s HAFA homeowner help line is staffed 24/7: 1-888-995-4673 - callers should ask for “MHA help”. Agents may ask for assistance by email.

Maggiano notes that, even with the help that they provide, they cannot guarantee to make every single short sale deal work; the aim of the help lines is to make sure that servicers are following the rules, and that cases that do qualify for a short sale make it through.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

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

Revisions to Improve and Streamline HAFA Short Sale Program Take Effect By February 1st

Seattle Short Sales - Wednesday, January 12, 2011

The HAFA (Home Affordable Foreclosures Alternative) short sale program was launched as an alternative to the failing HAMP (Home Affordable Modification Program) loan modification program. But HAFA itself has been no great success, either, with only 661 short sales having been processed through the program in its first eight months of operation.

Last month, the California Association of Realtors sent a letter, written on behalf of its members, outlining some of the problems with the program and offering recommendations. This week, the federal Treasury Department provided a new directive, outlining changes to the HAFA program that are intended to streamline the HAFA process and to make the program more accessible to homeowners. Although the changes become effective February 1st, loan servicers are encouraged to implement them as soon as possible.

One of the most significant changes is the elimination of the requirement that the borrower's total monthly mortgage payment exceeds a 31% debt-to-income ratio - a requirement that many industry professionals believe should never have been there in the first place. This change will allow more people to qualify for HAFA, broadening the reach of the program.

Another change that will allow more people to apply is that the amount of time that a property may have been vacant prior to signing a short sale agreement has been extended from 90 days to 12 months. However, the requirement that the property was the sellers' principal residence prior to relocation remains.

Other changes pertain to second mortgages. Previously, second-mortgage investors were required to accept 6% of the unpaid balance owing to them, up to a cap of $6,000. Under the new guidelines, although the $6,000 cap for second mortgages remains in place, the 6% rule has been eliminated.

The HAFA process will also be streamlined by a requirement servicers provide borrowers with a short sale agreement within 30 days of being requested to do so.

The full list of the new HAFA changes may be found at: https://www.hmpadmin.com/portal/programs/docs/hafa/sd1018.pdf

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

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


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