The Home Affordable Foreclosure Alternative Program (HAFA) will be providing short sale guidelines for loans not owned or guaranteed by Fannie Mae and or Freddie Mac starting in April 2009.  For the property to be eligible it must be the borrower’s principle residence, first lien mortgage originated on or before January 1, 2009, and the mortgage is delinquent or will be going delinquent in the foreseeable future.  The current unpaid principal balance must be equal to or less than $729,750.  The borrower’s total monthly mortgage payment has to exceed 31% of the borrower’s gross income.  Fannie Mae and Freddie Mac are expected to come up with their own guidelines soon.

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I have received a lot of phone calls lately about listing short sales.  I am currently getting my distressed property certification and short sale certifications because I am seeing such a need for them in this market.  I have taken short sale listings and continue to do so, but they are not easy.  Buyers need to understand short sales are time consuming and Sellers need to understand that the road is not without bumps at this time.  However, new legislation coming soon is going to streamline the process and help lenders to get through the process more quickly which will make buyers, sellers, Realtors, and banks happy!

As lenders adopt new federal guidelines for short sells, they will become less frustrating for everyone involved.  The short sale process will be standardized to some degree in 2009.  Lenders have the option to begin implimenting the new guidelines now, but they do not take effect until April of 2009.  These new short sale guidelines are part of the government’s new Home Affordable Foreclosure Alternative Program, known as HAFA.  This is part of President Obama’s Home Affordable Modification Program.  These new HAFA guidelines are voluntary, but major banks like Bank of America and Wells Fargo are going to participate.  This will hopefully clear up some of the confusion between lenders, sellers, and Realtors about short sales and create somewhat of a roadmap for the three to work together to get the property sold. 

Because of HAFA, lenders will finally have a financial incentive to get these deals completed in a timely manner, which has been a huge problem until now.  The guidelines will provide standardized forms so there’s no confusion between the real estate industry about what the bank is expecting in the form of paper work.  It will include standardized time lines for getting an answer back to the buyer and seller, standardized procedures, and more.  Won’t it be great to have preapproved short sale terms prior to the property  being listed?  My sellers and buyers are joyful about that!!   

As with any new guidelines, they will take months to work out the details.  But this new process for short sales is the beginning to making short sales more successful for buyers and sellers.

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WASHINGTON (Associated Press <http://www.statesman.com/business/content/business/stories/other/2009/12/02/1202shortsales.html> ) – Guidelines for short sales to help homeowners who need to sell their houses but cannot secure contracts at a high enough price to pay off their mortgages have been revised by the Treasury Department.

 The plan was created to aid homeowners whose income or debt is too low to qualify them for a loan modification under the Making Home Affordable program. The plan establishes timetables, a standard process and documents, and cash incentives for participation.

 The new guidelines require the:

 *     property be the homeowner’s primary residence;

*     homeowner be delinquent on the mortgage or likely to default;

*     loan was made before Jan.1 this year and is less than $729,750; and

*     borrowers’ total monthly mortgage payment exceeds 31 percent of their before-tax income.

 The guidelines are expected to reduce paperwork by requiring mortgage companies to use the financial and hardship documents submitted by borrowers seeking a loan modification. To speed up the approval process, mortgage companies will have to approve short-sale terms, including the minimum listing price, before the house is put on the market.

 Mortgage companies will be required to offer the program as of April 5, 2010.