Home Affordable Foreclosure Alternatives (HAFA) Short Sale Improvements
Distressed properties in the Raleigh Durham area continue to be a growing percentage of our housing market. It has been reported numerous times that homes in the Triangle, NC area as well as around the country too, are being rented and owners are not making their mortgage payments. When these homes go into foreclosure the tenants are forced to move out quickly. Yes, you read this correctly. Tenants are paying rent on time to their landlords and the landlords are not making their mortgage payments with the rents received. Tenants are unaware that this is happening until a foreclosure notice is posted on their front door. This leaves renters losing their security deposits, if the properties are not managed by a professional company, and they also need enough ready cash to pay for a move, new security deposit and first month’s rent at their next residence. This is a real and growing problem and renters would be more protected if they only leased properties through property management companies with legal trusts accounts to hold their security deposits. In addition, Raleigh real estate rentals are at a high premium so finding another home to move to fast is a real challenge. With the new HAFA guidelines renters will find financial help making Raleigh area real estate rentals a safer choice and short sales for homeowners a better financial solution than in the past.
What is a short sale: Many homeowners in the greater Raleigh area find their high loan balances from mortgage choices such as; 100% financing, second mortgages taken out to avoid private mortgage insurance premiums or make home improvements along with falling home values during the National housing crisis has left them in a position of owing more on their home than the can presently sell if for. When a home is over leveraged and under value it creates what is known as a short sale. A sale where the amount being paid by a new home buyer will not cover the debt on the property and they lender will agree to take the loss. The now distressed homeowner, real estate agent and new home buyer works with the lender to agree on a sales price at today’s value. Regardless of what was financed or still is owed on the home by the original borrow.
Great News for HAFA Qualified Mortgages in the Great Raleigh Area
HAFA Supplemental Directive 12-02, effective June 1, 2012, impacts short sales with loans from non-government-sponsored enterprises meaning most conventional mortgages in which the homeowner is eligible for the HAFA program. HAFA, Home Affordable Foreclosure Alternatives is a pre approved short sale with cash back relocation assistance to borrowers and tenants. FHA and VA mortgages are not qualified for HAFA.
Key Enhancements Include:
- Time frame extended: The program has been extended to Dec. 31, 2013. The HAFA short sale or deed in lieu of foreclosure can be initiated up to Dec. 31, 2013; however, the transaction must have a closing date on or before Sept. 30, 2014.
- Eligibility updated: Occupancy requirements for HAFA eligibility have been removed; however, the property can’t be owned or secured by a business entity.
- The second lien maximum has been increased from $6,000 to $8,500.
- HAFA relocation assistance of $3,000 will be paid only to the primary resident (borrower or occupant) of the property at time the agreement is executed. The resident must vacate upon closing.
- Vacant properties are not eligible for HAFA relocation assistance.
- Non-borrowers (tenant, legal dependent, parent or grandparent) can now qualify if occupying the property and must vacate upon closing.
Additional information:
- This policy is effective June 1, 2012, for new HAFA-eligible short sales initiated. It also applies to current HAFA short sales prior to closing.
- Tenants will be eligible only for the $3,000. Any money available from additional incentive payout opportunities must be paid to the borrower. The HUD-1 Settlement Statement must reflect the breakdown of all these incentives.
- The borrower will be responsible for requesting and managing the tenant relocation assistance, including submitting required proof of occupancy and other documentation.
Additional recommendations:
- Help your financially distressed clients understand the benefits a HAFA short sale, including the relocation incentive. Review the agent HAFA education guide to learn more.
- Provide the Bank of America non-GSE HAFA Eligibility FAQ to interested homeowners.
- Direct homeowners to contact Customer Care at 1.866.880.1232 if they have questions.
- Call Linda Craft & Team, REALTORS Certified in Short Sales for a free consultation. Call 919-235-6300 or visit www.lindacraft.com