On Thursday, I listened in on Distressed Property Institute co-founder Alex Charfen’s monthly phone call with his CDPE (Certified Distressed Property Expert) constituency. The topic of conversation: HAFA (Home Affordable Foreclosure Alternative), the Obama Administration’s latest housing-related initiative, which is set to launch on April 5.
One comment that caught my attention right off the bat: Charfen said 2010 is being hailed as “the year of the short sale.” Not just because of the extensive short-sale inventory currently on the market all across the country. And not just because distressed properties will continue to be a significant segment of the real estate market for the foreseeable future.
What should 2010 apart is that it is the year in which short sales got easier.
Let’s hope so.
Because, for many people who have experienced a short-sale firsthand in Central Oregon during this recession — whether as a buyer, seller, real estate agent or mortgage broker — it has been a challenging, often infuriating, even impossible, process. Without an industry-wide standard for handling these complex transactions, lenders have been left to deal with the onslaught of requested short-sale approvals however they see fit. Some have been more successful than others at working their way through their short-sale inventory. Many have failed miserably.
Enter HAFA. An extension of HAMP (the underwhelming Home Affordable Modification Program), HAFA was designed to simplify and streamline the short-sale process. Unfortunately, the “streamlining” took the form of 43 pages of governmental guidelines (sigh). Basically, most homeowners struggling to pay the mortgage on a principal residence purchased before Jan. 1, 2009, are eligible, including borrowers who were eligible for HAMP but weren’t successful in securing a loan modification (i.e., just about everyone who applied).
HAFA is far from perfect. It’s voluntary, for one thing, and it applies only to non-Government Sponsored Enterprise mortgages, which means it doesn’t apply to loans owned or guaranteed with Fannie Mae or Freddie Mac — i.e., the majority of home loans today. Plus, participating mortgage servicers and investors write their own guidelines based on the Federal requirements and determine themselves how to implement the program.
I’m gonna put my inherent cynicism aside for a moment and assume that at least some of our fine lending institutions will actually follow these guidelines in a meaningful way. If so, they will provide some much-needed relief for homeowners facing financial hardship, and the country might actually begin to make some headway in wading through our daunting distressed-property inventory. If not… well, we know where we’re headed, and it ain’t pretty.
Below are a few of the components of the program:
* Borrowers are to receive pre-approved short sale terms before the property is listed.
* Borrowers are fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
* The processes, documents and timeframes/deadlines of a HAFA short sale are standardized.
* It provides $1,500 financial incentive for borrower relocation assistance.
If you’d like to find out more about HAFA, here are some handy resources:
* Info on who’s eligible for HAFA
* Complete 43-page HAFA guidelines
* CDPE website explaining HAFA, with list of participating lenders
* NAR HAFA FAQs
* Short Sale Superstar HAFA discussion forum
* Blog post by AR member Kevin Kranvcak on why sellers won’t want to participate in HAFA
About the Author:
Lisa Broadwater, GRI, CDPE is a Central Oregon-based real estate professional who specializes in listing and selling homes, especially in Sisters, Tumalo, Redmond and Bend.