HAFA and More Changes to Short Sale

Wednesday, March 17th, 2010 | Uncategorized

After the NAR’s repeated requests that guidelines be created to provide some uniformity to the short sale process, the Obama Administration has released new rules set to go into affect on April 5th.

Yes…it’s another shift in the short sale landscape, but how momentous? In earlier blog posts I predicted that HAMP/HAFA will be another thing that does not work.

For those with a rosier outlook (not me), this could mean fewer foreclosures in 2010, and a plan of action for distressed homeowners that is clear and decisive. It could also help to stabilize communities and values.

For those who are skeptical… Foreclosures are down because banks are holding back on processing them, homeowners will still have to depend on the banks (who can decide if they want to participate), and as for housing values…it’s about jobs. With parts of California hitting over 20 percent unemployment, housing values aren’t coming back soon.  Same with the rest of the U.S.

The good news, I think… real estate agents will be expected to know and understand the short sale process. Hopefully, they will learn that investors provide valuable liquidity to the market. The waters shouldn’t be as muddy, which will make the process easier to understand.  This could make collaboration between investors and real estate agents more productive.

You should check it out for yourself here. (Don’t worry, this link is a quick read.)

Some additional observations:

• For those of us working the short sale niche for several years, we know that the industry is always in transition. While this is true of traditional residential real estate, short sales have more moving parts.
• Properties with 2nd liens will probably not qualify as both lenders need to agree and the 2nds are expected to ask the buyer to contribute (but this may not be in the interest of the HAFA design).
• This is supposed to speed up the process and since the lenders will give a settlement in full, sellers will be enticed by the bank –– which will save the bank thousands on court costs.
• For investors, this will probably mean that available properties will be 2 lien properties or the rehab typed that would normally be held for 90 days.
• Since sellers are only getting a $1500 incentive to complete a HAFA short sale, sellers may consider giving up on the program since it requires them to continue to make payments to the lenders for the “personal property.”

1 Comment to HAFA and More Changes to Short Sale

Zach Kennedy
March 19, 2010

Jeff, great posts! Will the HAFA really speed the short sale process up? If borrowers are required to go through HAMP first and knowing the disaster that program has been wouldnt this just lengthen the short sale process? I have not heard of many HAMP loan mods moving very fast so if they are taking a long time and a borrower gets at least 120 days for the HAFA wouldnt this just extend the amount of time it will take to sell a short sale property? Plus, would it not be more attractive for homeowners that want out now, just start the short sale process immediately, which i dont believe they can do with the HAFA program because of the HAMP being required first? Thanks and GOD BLESS!

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