HAFA Revisions by Treasury Dept. Affects Homes under $100K

In an attempt to slow down the rampant foreclosures plaguing the U.S., the Treasury Department has revamped its short sales policy through its Home Affordable Foreclosure Alternatives Program (HAFA). Short sales are common when homeowners are facing foreclosure. The new HAFA guidelines would provide troubled homeowners incentives to opt for a short sale in lieu of a foreclosure. Mortgages owned or guaranteed by Fannie Mae or Freddie Mac, or insured or guaranteed by the FHA are not eligible for the new HAFA provisions.

 

Participants in the HAFA program now have new options and lenders have new requirements while dealing with short sales. The biggest change is it eliminates the 6% cap that first lien holders had on payments to second lien holders. However, this change only applies to homes under $100k in value because the overall cap remains unchanged at 6%.

 

The new HAFA rules which went into effect on February 1 include the following changes:

• Vendor fees can no longer be charged back to the seller or deducted from the commission.
• Lenders are required to first offer a potential short sale or a deed in lieu of a foreclosure.
• Lenders will have 30 days to send borrowers a short-sale agreement that includes the list price or acceptable sales proceeds under recent changes made to the HAFA program, aimed at distressed borrowers who don’t qualify for other government loan modification programs.
• Lenders will have 30 days to respond to an executed short sale contract.

  

In the past, buyers would frequently walk away from short sale offers because of the time it took lenders to review and approve. The stricter timelines are meant to speed up the short sale process.

 

This is the second major revision to the program since it was launched in 2009.