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Good Changes Coming to HAFA

Posted by on Jan 6, 2011 in Short Sale News | 0 comments

There are some changes coming to the HAFA short sale program that will positively affect your clients

on Dec 28, 2010 Supplemental Directive 10-18 was issued by the Making Home Affordable program.

These changes take affect Feb 1, 2011.

Many of these changes address negative issues that have limited this program up until this point and have disqualified many sellers.

Key Changes coming are;

  1. Vacant or rented properties will no longer be disqualified from HAFA so long as the property was the seller’s primary residence within the last 12 months.
  2. There will no longer be a requirement that the seller’s current mortgage payment be greater than 31% of their current gross income.
  3. HAFA no longer requires the sellers financials be reviewed for qualification.  However, the servicer or investor may still require it.
  4. Payouts to subordinate liens are no longer limited to 6% of the subordinate liens outstanding principal balance.  The Max aggregate payout is still capped at $6,000.  It is now up to the investor to determine their allowable %.
  5. Real estate commission cannot be cut to less than 6%, even when pre-applying for the program.  This was a major negative previously.
  6. Servicers are now required to respond to short sale requests within 30 days, whether the files was pre-applied for or not.  We’ll see about this one.  They don’t meet the timeline requirements now, so I don’t see that changing.

In all these updates to the program should remove some roadblocks that have disqualified seller’s in the past.

Unfortunately, not all of the negatives to pre-applying for HAFA prior to having a purchase contract have been removed.

  1. Seller’s may still be required to pay mortgage payments equal to 31% of their gross income during the marketing period after pre-applying.
  2. Lender’s doing their value determination when the property has not been marketed and there are no offers from the market often come in higher than future buyer offers do.  So pre-applying is still a gamble when it comes to the lender’s determination of value and should it come in high, limited ammunition is available to dispute it.
  3. An value that come in higher than the market is willing to pay can doom a seller to having to accept a deed-in-lieu of foreclosure.  Having a full marketing history and offer to show the BPO agent is always the best strategy to combat and unrealistic value.  Whenever possible this is my suggestion.

Download the full Directive Here.

I believe these changes to the program will allow many more sellers to sell their properties via a HAFA short sale which will afford them a full release of liability on the loan when the house sells.  This will allow them to move on with their lives.

On caveat to this update.  This update is for non-GSE loans only.  So these changes are for non Fannie-Mae and Freddie Mac loans.  The 2 GSEs have their own versions of HAFA and their own guidelines.  We will have to wait and see if they implement these changes also.

Sean Wilder

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