The Home Affordable Foreclosure Alternatives Program

aara-logoAttempting To Reduce Transaction Time for Short Sales

The HAFA program takes effect on April 5, 2010—although some loan servicers may implement it sooner, if they meet certain requirement–and sunsets on December 31, 2012.

Essentially, it will mandate a 10-day time period for lenders to make a decision once a file has been completely turned over to the lender by the homeowner.

Misconceptions About The New Policy

There seems to be a lot of misunderstandings about the policy as many Realtors are interpreting the language to mean “10 days from the date a sales contract is executed”.  That is NOT the case.  The lenders, in my opinion will still drag their feet. The time starts to run when the completed file is officially received by the lender or decision maker.

For Sure, A Lack Of Clarity

Of course, homeowner and lender will disagree on when a file has been [1] completed and [2] submitted and ultimately, the bureaucratic fangs will expose themselves in opportunistic fashion to completely devoid the process of any meaningful change.  If the homeowner turns in a file, what’s to stop the lender from continuously requesting additional documents or claiming that certain required documents were never received?  There is always a way to stall the process and lenders are notorious for that, especially when it means accepting losses.

Government Incentives For Lenders

Under the program, compliant lenders will receive $1,000 to cover admin costs, but 1st mortgage holders must release the borrower from further liability and deficiencies on the mortgage.

Requirements To Be Eligible

In order to start a short sale under HAFA, borrowers must have first tried to apply for the federal loan modification program.  Then and only then, when they are not approved for such or can’t afford the loan modification presented, do borrowers become eligible.

A Small Step Forward

I don’t think this will have a real lasting effect or result in any drastic improvement for Short Sale transactions.  They are unfortunate situations which drag on and on and on.  If anything, this program will raise scrutiny about the process and highlight the fact that the Government wants the banks to get on board.  Lately, the Government has been getting involved in everything, good or bad, so regardless, a little pressure might be a good thing.

The EWM Guys are here to help, ALWAYS!  If you wish to comment or have questions about this particular program, leave a comment below or contact me.

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