HAFA modifications designed to help avoid foreclosures
The short sale process is changing after the federal government announced modifications to the Home Affordable Foreclosure Alternatives (HAFA) program in late March.
“Up until now, banks seem to have been stalling the process and short sales have been taking six to nine months,” said Loren Keim of Century 21 Keim, Allentown, author of Short Sales: Step by Step and adjunct professor with Lehigh University’s Goodman Center for Real Estate. “Banks didn’t have a standardized system for short sales. It’s taking them months to respond; they’re overwhelmed with requests and they’re short staffed.”
HAFA’s intent is to assist borrowers who cannot stay in their homes, to help them avoid the foreclosure and to provide an easier transition, according to Danielle Kutch, policy analyst with the U.S. Department of Treasury.
Based on feedback from people involved in the process, the Treasury Department released an updated version of HAFA. Kutch explained some of the major changes include:
- Increased borrower incentives for relocation from $1,500 to $3,000
- Increased servicer incentives from $1,000 to $1,500
- Raised investor incentives from $1,000 to $2,000
- Adjusted amount that can be paid to second lien holders from $3,000 to $6,000.
“From what we’ve been hearing, people seem to be excited about the changes and the potential to streamline the process,” Kutch added.
REALTORS® working with a homeowner considering a short sale or foreclosure need to be aware of the other alternatives. “Many agents fall short in letting consumers know about the alternatives to short sales or foreclosures. They should be informing the consumer about forbearance or mortgage modification options. If they aren’t doing so, the agents could be creating some legal liability for themselves,” Keim said.
If the seller decides a short sale is the best option, the REALTOR® should contact the bank as soon as possible. REALTORS® must be persistent, calling lenders at least twice a week to ensure the short sale doesn’t get overlooked, he said.
Keim said other changes in the HAFA update are:
- Borrowers will be allowed to get short sale pre-terms before the sale
- Lenders won’t be able to file a deficiency or a gift of equity against the homeowner
- Some money from the short sale may be given to second lenders who currently do not receive payment following a short sale
- Borrowers can’t renegotiate the commissions.
Topics
Share this post
Member Discussion
Recent Articles
-
Estimated Closing Costs: How Mandatory Are They, Really?
- November 22, 2024
- 5 min. read
When do you have to give estimated costs? Can you use estimated costs developed by others? Let’s hit a couple of common Legal Hotline questions about the details of estimated closing costs.
-
Tri-County Realtor® Leads Efforts to Fight Hunger
- November 21, 2024
- 2 min. read
Heather Griesser-LaPierre, a member of Tri-County Suburban Realtors®, led an initiative last month to pack 238,000 meals for hurricane victims alongside fellow Realtors® and other volunteers.
-
9 Tips to Save Money When Moving
- November 20, 2024
- 3 min. read
For new homeowners, moving costs can add up quickly. Here are nine tips to keep moving costs down, from Point2.
Daily Emails
You’ll be the first to know about real estate trends and various legal happenings. Stay up-to-date by subscribing to JustListed.