Great news! As we have been suggesting would happen, the U.S. Department of the Treasury is launching a new program to help homeowners escape foreclosure. The Chief of the Homeowner Preservation Office (it is amazing there actually is such a department) at the Treasury, Laurie Maggiano, released information on the Home Affordable Foreclosure Alternatives (HAFA) while speaking at the Mortgage Bankers’ Association Annual Convention in San Diego yesterday. The official launch is expected in the next week or so.
The program allows borrowers in imminent default to “make a graceful exit” from their home. HAFA will help the current owner from having the stigma of foreclosure associated with them. Obviously, it will also be better for the neighborhoods around the distressed property. It is always better to have a new family move in as opposed to having an empty house on your block.
HAFA will offer financial incentives to both servicers and borrowers, and associated secondary investors, in order to facilitate a short sale or deed in lieu of the property.
Laurie Moore-Moore, a specialist in this area reports the following proposed changes:
Change #1:
There are clearly defined steps which the servicer’s loss mitigator must follow in sequence when a loan is in default (or imminent default ). If attempted refinancing or a loan modification do not work — then and only then — will a loss mitigator consider the possibility of a short sale. This is the only time during the loss mitigation process when a short sale will be a possibility. The loss mitigator will use a specific net present value formula to determine if the lender/investor will net more from a short sale than from a foreclosure. The decision is strictly a financial one. This means the short sale attempt will be approved in advance if it is financially to the lender’s advantage.Change #2:
You will continue to list with the seller, but the loss mitigator sets the price and the listing term. The listing term can range from as few as 90 days to as long as 365 days. The servicer/lender still must accept the contract which your seller has approved.Change #3:
Good news! Fannie Mae’s Servicing Guide Announcement #09-03 clearly says there is to be no negotiation of short sale commissions. “..closing of pre-foreclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to the level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6% of the sales price of the property in aggregate.” In other words, if you’ve negotiated a listing fee with the seller, the servicer/lender may not ask you to reduce that fee.
Ms. Moore-Moore has a course available to get you up to date on the changes.(Ms. Moore-Moore’s course)
I will keep you current as other information is released. Schedule to take a class on the ‘short sales’ process immediately if you haven’t already done so. ‘Short Sales’ will be critical to your business for the next 12-18 months.
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