Just a year ago, when preforeclosure and foreclosure properties were entering the market in unimaginable numbers, many real estate agents were estimating six to 10 months at best to complete a short sale. Now, some are beginning to see closings in as few as 10 weeks. That’s good news for sellers, the housing market and the U.S. economy.
The improvement is a product of a few key developments creating momentum in the lending industry. First, banks are starting to adjust to the market and becoming more proactive in creating systems and solutions for homeowners in distress. Second, and arguably more important, the U.S. Treasury has enhanced the guidelines and incentives for banks that are committed to improving the loan modification and short sale processes.
The Home Affordable Foreclosure Alternatives (HAFA) program, announced in November 2009 and fully implemented April 5, is the government’s answer to the problem. It’s a supplement to the February 2009 Home Affordable Modification Program (HAMP) that outlines a separate set of criteria for short sales or deeds-in-lieu to address the group of homeowners who are facing foreclosure because loan modification hasn’t worked out.
HAMP was a well-intentioned, albeit slow, start to helping at-risk borrowers. Unfortunately, the guidelines for modifications leave out many distressed homeowners who are eligible but are not successful in supporting a new loan.
HAFA provides that missing next step for homeowners who are not approved for modifications. Now, they can pursue a short sale in a more timely and orderly manner. Here are some of the ways the HAFA program is already improving the process (For more details on the program, you can visit realtor.org and search “HAFA”):
-Standardizes paperwork and timelines
-Requires lender response on an offer within 10 days
-Allows for preapproval on pricing of a short sale
-Eliminates deficiency judgments on first mortgages
-Offers $3,000 in relocation assistance
-Pays servicers $1,500 toward administrative costs
Although there’s still a tremendous amount of work ahead, I’m confident that we’re making progress in the distressed property market.
Representatives from Treasury and Bank of America addressed agents across the country during a live RE/MAX broadcast April 5, the day that the HAFA guidelines took effect. This message was clear: Cooperation, education and a better understanding of the challenges facing all parties in these transactions is the best way forward.
Credit: RISMedia 6/8/10