New short-sale rules may help sellers: from Home Destination

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New Short Sale Rules That Twin Cities Home Sellers May Benefit Fromnew short sale rules may help sellers

HAFA establishes streamlined short-sale rules and provides incentives for borrowers and lenders to work together to avoid Minnesota foreclosures. The rules — in effect between April 5, 2010, and December 31, 2012 — also are intended to speed up the short-sale process.


"The streamlined short-sales process will definitely help homeowners," says David Liniger, Re/Max International chairman and co-founder.


Understand Your Lender Agreement And Position


Before HAFA, homeowners often listed their home for sale without an idea of what the lender would accept. "A lot of sellers and their Realtors have not been able to sort out the problems with short sales and have given up on the process because, even after sending in the correct paperwork, they have sometimes waited three or four months for their lender to respond," Liniger says.

Under HAFA, borrowers receive per-approved short-sale terms from the lender before putting the home on the market. Lisa Matykiewicz, a Realtor and certified distressed property expert, says the updated short-sale rules establish an easy-to-understand process with defined steps that "make it easier for everyone to understand."


Eligibility requirements


The HAFA guidelines apply to lenders that voluntarily participate in the Home Affordable Modification Program (HAMP)HAMP . The Department of Housing and Urban Development says more than 100 servicers have signed up to participate in HAMP, covering more than 89% of mortgage debt outstanding in the country.

To be eligible for HAFA, homeowners must first apply for a loan modification through HAMP. Owners who do not qualify for a loan modification or miss payments during the initial loan-modification period qualify for HAFA. Download and read the HAFA Eligibility Checklist to see if you qualify.



Other HAFA Short Sale Requirements Include:


short sale rulesProperty is principal residence.

short sale rulesMortgage originated before Jan. 1, 2009.

short sale rulesMortgage is owned or guaranteed by Fannie Mae or Freddie Mac.

short sale rulesBorrower is delinquent or default is foreseeable.

short sale rulesHomeowner demonstrates hardship.

short sale rulesBorrower’s total monthly housing payment exceeds 31% of gross income.

short sale rulesUnpaid principal does not exceed $729,750.



New Rules For Short Sale Notices


According to HAFA rules, lenders now must offer a short sale in writing to the borrower within 30 days if the borrower does not qualify for or complete a loan modification. Borrowers then must respond within 14 days to the lender’s short-sale agreement. "I think it’s great that the lenders in this program have to offer a short sale before going to foreclosure," Matykiewicz says.

When a purchase offer is made, borrowers must submit the sales contract to the lender within three days, along with the buyers’ mortgage pre-approval and the status of negotiations with other lien holders on the seller’s property.


Finally, lenders must approve or deny the contract within 10 days.


HAFA rules also state that lenders must release borrowers from the obligation to repay the difference between the sales price and the loan amount. No deficiency judgments are allowed for a first or second loan.


Other short sale incentives


rules for sellersIn the past, short sales were especially difficult for homeowners with more than one loan on their home, since the home sale typically repaid only the first mortgage. HAFA’s financial incentives HAFA include a payment of up to $3,000 for second mortgage holders.

rules for sellers"Second trust lien holders are often owed five or 10 times that $3,000 payment," Liniger says. "But if the property goes to foreclosure, the second trust holder is not likely to get any money at all. This at least guarantees they get something."Monday, May 3rd, 2010

rules for sellersOther HAFA financial incentives include $1,000 to loan servicers to cover administrative fees, up to $1,000 for mortgage investors who agree to share short-sale proceeds with second lien holders and $1,500 to the homeowners for relocation.

rules for sellers"The moving expense allocation acts as an incentive for them to stay in the property until the short sale goes through," Liniger says. "Owner-occupied properties are usually in better condition than vacant homes."


This entry was posted on Monday, May 3rd, 2010 and is filed under Real Estate Articles from Jenna Thuening.