Carlsbad, CA–I returned a couple of days ago from an intensive CRS gathering in Las Vegas and attended their Foreclosure and Short Sales class, where much discussion centered on the Home Affordable Foreclosure Alternative Program (HAFA) that was instituted last April. The intent of this federal program is for lenders to circumvent foreclosures by pre-approving short sales for their distressed borrowers.
When the large gathering of real estate agents and brokers from around the country was asked if any had successfully completed a HAFA sale, nobody raised a hand.
That surprised us all for a couple of reasons: (1) This group represents top producers in the field of real estate; and (2) HAFA would seem to offer an elegant solution that would help resolve our real estate crisis–at least as it applies to mortgages on primary residences. This, from Realtor.Org:
- Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
- Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
- Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
- Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
- Uses standard processes, documents, and timeframes/deadlines.
- Provides the following financial incentives:
- $3,000 for borrower relocation assistance;
- $1,500 for servicers to cover administrative and processing costs;
- Up to $2,000 for investors who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a one-for-three matching basis.
- Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.
I would be very interesting in hearing from anyone who has successfully completed a HAFA transaction. Skepticism was thick at this meeting, as many Realtors speculated that large banks may be holding off on both short sales and foreclosures until the market recovers–along with their bottom lines. It is estimated that there are 6 to 7 million homes in “shadow inventory” or those that are in some stage of default.