WHAT I will discuss on the second portion of this article will be about HAFA (Home Affordable Foreclosure Alternative) which will typically offer a qualified seller $ 3,000 at closing of a short sale for relocation cost.
But more interestingly is what other lenders are doing on their own to speed up short sale process by offering sellers more money to avoid foreclosures. I have actual approval letters paying homeowners $5,000- $10,000 for sellers to close on short sales. I have approval letters also of lenders paying off government lien for $20,000 + paid clear at closing of a short sale. IRS might be tough that I have not gotten one yet, hopefully soon.
Times are changing, I believe the banks will aggressively push for more short sales to move fasters thru the system to clear away the financial mess they created. I encourage you to check all your options before letting a property go into foreclosure. Getting a large check to close on a property that is under water should be a nice incentive for you to save up later for a good deposit to rent or even save up long term for a home later on.
More lenders are forgiving debts and releasing liabilities after a short sale. Just have to be with a knowledgeable agent who can prove that they have done short sales and negotiated with your bank before to guarantee smooth closing.
Now they most common and probably generalized method of most lenders now a days to allow some kind of a credit back is thru HAFA.
Most lenders will allow a so-called “Relocation Assistance” to home selling under Short Sale, but there are many guidelines that you have to qualify for and there are restrictions. This is also not Mandatory to lenders that they participate in this program. HAFA stands for a federal government program named “Home Affordable Foreclosure Alternatives Program” which was created to compliment other government program, the “Making Home Affordable Program.” HAFA steps in to help homeowners who:
1. do not qualify for a trial mortgage modification under the Making Home Affordable Program;
2. do not successfully complete the trial period for their modification;
3. miss at least two consecutive payments during their modification period; or
4. request a short sale or deed-in-lieu of foreclosure.
This program was created to further assist the HAMP program which was thought not to be helping enough homeowners with their mortgage problems.
With HAFA, the federal government is giving borrowers a way to circumvent that inevitable foreclosure after the modification idea has not worked for them. How? HAFA gives those borrowers a viable alternative to foreclosure. Here, the issue of being able to keep the home is not viable, and HAFA steps in to help the homeowner avoid a foreclosure on their record through either (1) a short sale or (2) a deed in lieu of foreclosure.
What about deficiencies? HAFA gives the borrower a clean slate.
In a short sale the lender (servicer) may have a remaining balance on the books, once the remaining amount due on the home loan is compared to the property value of the home itself. The negative number, “the deficiency,” can be the subject of a collection lawsuit by the lender in most states. However, HAFA provides further assistance to the borrower/homeowner by removing this vulnerability as the lender must agree to write off that loan balance, as well as all other obligations tied to the first lien mortgage. Under HAFA, once the lender accepts the short sale or the deed in lieu of foreclosure, the loan balance is considered cleared.
What about moving costs?
Once HAFA’s plan to salvage the failed modification situation through a short sale or deed-in-lieu, the final step remains of getting the homeowner/borrower into a new home – now that their home has been transferred to a buyer or to the bank. To that end, HAFA will pay up to $3000 per homeowner in relocation costs at closing.
On 12/31/2010, there were 521,630 active permanent modifications and 152,289 active trial modifications, while 1,025,907 homeowners were rejected for HAMP modifications by the eight largest banks/servicers, and another 572,655 trial modifications failed.
Accordingly, the Treasury Department responded with changes that became effective February 1, 2011 to make these programs more helpful to American homeowners, found in its December 2010 version 3.0 of the Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages. Now, for example, banks/servicers do not have to verify a borrower’s financial information or to determine if the borrower’s total monthly mortgage payment exceeds 31
Can HAFA help you? Maybe, especially with these new changes. It’s worth your time to investigate
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Please give Ken Go a call of 1st Innovative Finance Group at (562) 508-7048 and inquire to get these help options. You can also write to [email protected]. Thanks.
