I wanted to bring to your attention some important details about the recently announced Home Affordable Foreclosure Alternatives program (HAFA), which provides instructions for lenders and servicers participating in the Making Home Affordable Program and Home Affordable Modification Program (HAMP).
HAFA helps standardize the short sale and deed-in-lieu process by creating an alternative to foreclosures for homeowners unable to successfully modify their troubled mortgage under HAMP.
Although not perfect, the program reflects C.A.R.’s efforts in the federal arena to standardize the short sale process, protect your business, and safeguard commissions. It also makes clear the timeframes by which servicers must respond to an offer on a short sale.
The HAFA program will permit pre-approved short sale terms before a property is listed; prevent servicers from attempting to reduce real estate commissions established in the listing agreement as a condition for short sale approval; release borrowers from future liability for the debt; and provide financial incentives to borrowers, servicers, and investors.
Under terms of the program, the borrower and/or listing broker have three business days to submit an executed purchase offer and related documents to the servicer on a short sale, and the servicer has 10 business days to respond to an executed purchase offer. The servicer may negotiate the real estate commission prior to the listing of the property, not to exceed 6 percent, but once this has been agreed to the commission may not be reduced at a later date.
The servicer also will determine the minimum net proceeds for a short sale; if an offer presented to the servicer by the borrower or listing broker meets the net proceeds requirement, then the servicer must accept it.
Each participating servicer also must develop a written policy that describes the basis on which the servicer will offer the HAFA program to borrowers. All borrowers must be evaluated for a loan modification prior to going to HAFA. For additional information, please go to car.org at http://www.car.org/governmentalaffairs/federal/ustreasuryfap/.
HAFA is a step in the right direction toward helping distressed homeowners now, and is an effective tool to quickly move distressed properties through the market. Although HAFA goes into effect April 5, 2010, our expectation is that servicers may choose to implement it earlier. The program is available only for non-Fannie Mae- or Freddie Mac-owned loans up to $729,750. C.A.R. will continue to reach out to servicers and lenders to encourage their adoption of HAFA and other programs that will help California’s housing market continue to recover. We anticipate that Fannie and Freddie will release their own guidelines soon, and we will share details with you as soon as they are available.