A new initiative by the Obama Administration in its slow-moving and often-criticized foreclosure rescue effort will now offer a short-sale alternative that includes principal forgiveness and $1,500 in “relocation” assistance to borrowers.
The plan kicking off April 5 — Home Affordable Foreclosure Alternatives, or HAFA – is for homeowners who have already qualified for the government’s primary foreclosure-prevention campaign, the $75 billion Home Affordable Modification Program, HAMP, and have failed to complete its reduced-mortgage payments trial.
The new program takes borrowers off the hook for owing the difference between the balance of mortgages and the short sale price. Under HAFA, up to $3,000 would go to holders of second mortgages and borrowers get the $1,500 to help them move.
HAFA guidelines allow borrowers to receive pre-approved short sales terms before listing the property, and requires borrowers to be fully released from future liability for first mortgage debt.
Before a borrower is approved for a HAFA short sale, the mortgage servicer “must determine the minimum acceptable net proceeds (minimum net) that the investor will accept from the transaction,” HAFA guidelines state. “Each servicer must develop a written policy, consistent with investor guidelines, that describes the basis on which the minimum net will be determined.”
Short sales can be cheaper than the prolonged foreclosure process for banks and they prevent foreclosed and abandoned properties from adding to neighborhood blight and under-valuing. But short sales are also hampered by second-liens and reluctance from banks to take significant losses.
U.S. officials are trying to restrain the foreclosure crisis as ominous signs emerge, including the unabated foreclosure filings still hitting some states. And a potential of higher rates of filings in months to come as more homeowners find themselves “underwater,” or owing more on their homes than the value of the properties.
Moreover, HAMP has fallen short after a year of targeting more than 3.4 million eligible borrowers, those 60 days late on their mortgages. Only 116,000 borrowers have been given permanent mortgage reductions through January – a 3 percent rescue rate.
HAFA has already come under fire from appraisal groups for allowing “broker price opinions,” or BPOs, to become part of the process. BPOs are estimated values of a property as determined by a real estate broker.
Four organizations representing more than 35,000 real estate appraisers sent a letter to U.S. Treasury Secretary Timothy Geithner saying that BPOs will encourage loan modification fraud – including fraud involving short sales as a new form of mortgage fraud.
“We urge the Department to reestablish independence in the valuation process to protect the safety and soundness of financial institutions, improve transparency, and safeguard the public trust,” the appraiser organizations’ letter said.
Critically examining the article above, I noticed forbearance mentioned not full obligation pardon. A forbearance does not erase the debt. What has HAMP or HAFA really done to help anyone. The government and President I voted for are not acting on the behalf of the people, but are showign themselves too protective of banks who caused this issue in the first place with their greed, and after the bailouts they’ve shown it to be un-ending. They take their sweet time to approve short sales, hold back inventory creating artificial seller’s markets in areas like San Diego, and the thing you’re not hearing enough in the media is the Insurance money they are sucking away at via Fannie Mae/Freddie and PMI (Private Mortgage Insurance). They artificially keeping property values high by manipulating the market and they have no incentive to move quickly or work with Buyers or Sellers. State governments like California will not move to make banks move faster because they are already bankrupt and reduced taxes as a result of property values settling to a level they should be in a true free market is not in their interest. The people need to stand with the Appraisers in Washington and put an end to the fraud, conflict of interest, and move to have those manipulating the markets brought up on charges as well as those who conspire to allow it in Washington. Criminals the lot of them! Wolves in public officials and Bank CEO clothing!!!
Indeed, you are correct. Although forbearance is an under-utilized option under HAMP, it is not part of HAFA guidelines. thank you for pointing this out.
Thank You Jessica. 100% right
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Will HAFA really work? Time will tell…..I suggest you all prepare for the worst.
Short sale Plan!!!??? What happened to helping people KEEP their homes? I can almost see them in DC throwing their hands up in the air and saying well since we can’t make the banks help the people stay in their homes – lets help them get them out, but we can only help them a little. We can only help a few and we will put a lot of red tape and stiplulations in this so even fewer will qualify. What is wrong with this picture? What has happened to our country??? My friend has been waiting for over a year for the bank to make a decision whether he qualifies for a modification or not. They will not give him an answer because there is nothing that legitimately disqualifies him and yet they won’t foreclose either always stating that it is in the investors hands.
An investor that is overseas is controlling the decision on whether a single dad and his 2 little sons in California can continue to live in their home or not. We are just a number in a sea of litigation and bureaucracy. We have sold our souls for profit and have lost control of this beautiful country. We have allowed corporations greed to take over at the sacrifice of our own peoples comfort and dreams. What happened to the days of peaceful protests and standing up for what we have worked so hard for? A free America? I guess when you live in a cardboard box under a bridge or in an alley because you have lost your job and your home, then that is what is NOW our free America.
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I would be interested to know if there is any benefit of the short sale plan for those who have their house paid off. If anyone knows please let me know.
Short sales seem like the government equivalent of a cop-out to a crappy plan to begin with! They should fix their initial problems before they start making newer ones to cover up existing ones!
I got the expert package with freehampreport.com cause it included a live, personal HAMP specialist to handle all my paperwork, filing, negotiations, and I can call and speak to him anytime I have a question or want an update! For a mere $495, I’m getting through the process faster than I could’ve alone and they guarantee it or money back! Its better than me short selling my home or just walking away… and ESPECIALLY doing all that tedious paperwork myself.
Granted, I’ve worked out a loan mod, I’m still worried about it being permanent or having them decline it… like most people. I got a 3 month extension on my mortgage and have made great strides in negotiations with B.O.A. (bank of america) thanks to my HAMP specialist. I read another article on AOL’s housing watch ( http://www.housingwatch.com/2010/03/02/web-site-cuts-through-hamp-redtape/ ) and the website freehampreport.com gave me a free eligibility test, told me I was eligible for a loan mod. and supplied me with easy software to fill out the forms. My bank rep actually said “this is the clearest and best filed form I’ve worked with yet!
To Sarah: A ‘short’ sale means the house is sold for less than the outstanding mortgage balance due. If the mortgage is paid, the house can be sold for whatever the market is willing to pay for it, regardless of the seller’s opinion of its value.
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The banks are ripping us off and the Government and no one wants to do anything about it. Did you know that the banks can put you in foreclosure even if you make your payments on time and you go to your congressman and they say sorry. They have a clause in every loan that if the property value lowers than the debt they can call the loan and there is nothing you can do about it even if you make your payments. PNC bank which is a TARP Funded bank just gave its employees bonuses and promotions on the basis of the number of Forbearance agreements and foreclosures they bring in. They take our money and then charge us for forebearance and give themselves bonuses and their are NO REGULATIONS. If Obama Plan really wanted to do something it shouldrequire all banks to return all forebearance fees to the people and there can not be any bonuses or promotions on basis for Foreclosures and forebearance agreements initiated by its employees for all TARP funded banks PNC bank should not only be penalized but also sued for mal practice, How would they feel if they were given a forebearance agreement by the US Goverment for all the TARP funds which is tax payers money. Until the goverment is for the people these banks will keep scaming us.
Reading all the above comments just disallusions me even more. I gave up a loan remodification because the process seemed to be going nowhere after months and months. I am $50000 plus upside down after putting $45000 on my home when purchased in 2005.
Because I am currently in bankruptcy, I checked on this new plan hoping it might help me to save some of the damage to my credit. From what I read above, even if it is possible to sign up, I don’t see much hope for a positive benefit.