Posted on: 16th Mar, 2010 01:18 am
Hi everyone,
In a bid to put a check on the rising number of foreclosure, the Obama Administration has come up with the Home Affordable Foreclosure Alternatives (HAFA) program. This program will offer new incentives to struggling borrowers and lenders to promote short sales i.e. sale of mortgaged homes for a price less than the outstanding mortgage balance.
The program is scheduled to begin from April 5, 2010. It promises to offer $1000 each to the investors owning first or second mortgages and the banks servicing those mortgages, if they agree to accept short sales and forgive the difference between the sales price of the house and the outstanding mortgage balance. The program also attempts to help homeowners by offering them $1500 in the form of relocation assistance.
Thanks,
Jerry
In a bid to put a check on the rising number of foreclosure, the Obama Administration has come up with the Home Affordable Foreclosure Alternatives (HAFA) program. This program will offer new incentives to struggling borrowers and lenders to promote short sales i.e. sale of mortgaged homes for a price less than the outstanding mortgage balance.
The program is scheduled to begin from April 5, 2010. It promises to offer $1000 each to the investors owning first or second mortgages and the banks servicing those mortgages, if they agree to accept short sales and forgive the difference between the sales price of the house and the outstanding mortgage balance. The program also attempts to help homeowners by offering them $1500 in the form of relocation assistance.
Thanks,
Jerry
Hi Jerry,
It is good to hear that homeowners will now be able to short sell their properties and avoid imminent foreclosures. But we have seen that the Home Affordable Modification Program started by the Obama administration has not been as effective as it was supposed to be. A meager 28% of the estimated 3.4 million homeowners have been able to modify their loan terms under this program! So, it is yet to be seen whether this new program promoting short sales will at all be able to help tens of thousands of delinquent homeowners facing foreclosures.
Moreover, mortgage industry experts fear that this new program will encourage people to run away from their mortgage responsibilities. Thus, even those who can afford to make payments will now seek to do short sale and relocate to a new home in order to avoid existing responsibilities. The homeowners will get financial assistance of $1500 for relocation and on top of that, they will be least bothered about the deficiency as the lenders would not come after them to collect it.
It is good to hear that homeowners will now be able to short sell their properties and avoid imminent foreclosures. But we have seen that the Home Affordable Modification Program started by the Obama administration has not been as effective as it was supposed to be. A meager 28% of the estimated 3.4 million homeowners have been able to modify their loan terms under this program! So, it is yet to be seen whether this new program promoting short sales will at all be able to help tens of thousands of delinquent homeowners facing foreclosures.
Moreover, mortgage industry experts fear that this new program will encourage people to run away from their mortgage responsibilities. Thus, even those who can afford to make payments will now seek to do short sale and relocate to a new home in order to avoid existing responsibilities. The homeowners will get financial assistance of $1500 for relocation and on top of that, they will be least bothered about the deficiency as the lenders would not come after them to collect it.
This is indeed a great initiative by the government. A short sale has a comparatively less negative effect on the credit score of a borrower. If the lenders are ready to go for a short sale rather than foreclosure or deed in lieu, it will be helpful for the borrowers in the long run. Thus, this will not only help them in getting rid of their underwater property but would also take care of their credit score to some extent.
With the launch of the Home Affordable Foreclosure Alternatives (HAFA) program, a large number of borrowers will be able to take advantage of short sales and avoid foreclosure. The lenders will get financial incentives in order to speed up the short sale process. As per the National Association of Realtors, the servicers would get around $1,500 to cover administrative costs and investors will get up to $2,000. In order to be considered for this program, the borrowers should have taken out their primary loans before January 2009 and owe less than $729,750.
Some of the major highlights of the Home Affordable Foreclosure Alternatives are as follows:
Considering all the eligible homeowners - All eligible homeowners should be considered for HAFA by a participating lender before foreclosing the property.
Cash contributions - The lender won't be able to ask for cash contributions from the borrowers nor will he be able to ask the homeowner to sign a promissory note at the closing.
Deficiency judgment - In a normal short sale, the lenders are able to pursue the borrower for a deficiency judgment. However, under this program, the lender will not be able to go after a borrower for the difference between how much a home is sold for and the actual loan amount owed.
Some of the major highlights of the Home Affordable Foreclosure Alternatives are as follows:
Considering all the eligible homeowners - All eligible homeowners should be considered for HAFA by a participating lender before foreclosing the property.
Cash contributions - The lender won't be able to ask for cash contributions from the borrowers nor will he be able to ask the homeowner to sign a promissory note at the closing.
Deficiency judgment - In a normal short sale, the lenders are able to pursue the borrower for a deficiency judgment. However, under this program, the lender will not be able to go after a borrower for the difference between how much a home is sold for and the actual loan amount owed.
In order to qualify for HAFA short sale, the borrower need to satisfy certain requirement. Let's take a look:
* Mortgage originated before January 1, 2009.
* Property should be the principal residence of the borrower.
* Homeowner should be able to show hardship.
* Home loan should be owned/guaranteed by Fannie Mae or Freddie Mac.
* Borrower should be delinquent or default should be foreseeable.
* Borrower's total monthly housing payment should exceed 31% of gross income.
* Unpaid principal balance should not exceed $729,750.
* Mortgage originated before January 1, 2009.
* Property should be the principal residence of the borrower.
* Homeowner should be able to show hardship.
* Home loan should be owned/guaranteed by Fannie Mae or Freddie Mac.
* Borrower should be delinquent or default should be foreseeable.
* Borrower's total monthly housing payment should exceed 31% of gross income.
* Unpaid principal balance should not exceed $729,750.
Good move by the government to help all those home owners who really need every effort .