SHORT SALE INFORMATION

What About Short Sales?

Don't walk away from your home;
we may have a solution for you!

What is a Short Sale?
A short sale is a term used to describe a process in
which a lender agrees to accept a lower payoff
amount on a loan than what is owed.

What if the home's market value has dropped?
Comparable home sales must substantiate that the
home is worth less than the unpaid balance due the lender. This unpaid balance may include a
prepayment penalty.

What if the mortgage is in or near default status?
It used to be that lenders would not consider a short sale if the payments were current. That is not always the case. Realizing that other factors contribute to a potential default, many lenders are eager to head off future problems before they start.

What if the seller has fallen on hard times?
The seller must submit a letter of hardship that
explains why the seller can not pay the difference due upon sale, including why the seller has or will stop making the monthly payments.

Contact us today for a free, confidential consultation to discuss your situation and to see how we may be able to assist you.

954-499-2751 or info@realtypayless.com

New Short Sale Legislation To Take Effect in April 2010 - HAFA

“A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the loan. It usually happens when a seller cannot pay the mortgage on their property, but the lender decides that selling the property at a loss is better than foreclosure. Both parties then consent to the short sale process, because it allows them to avoid foreclosure, which usually involves high fees for the bank and a poor credit report rating for the borrowers. This agreement, however, does not always release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.”

As a Real Estate Broker, and you as a distressed homeowner, know there is nothing short about a short sale. In fact, it is not uncommon for a short sale to take over 6 months to finally close, and that is IF it is approved. A lender has the last word, and will sometimes authorize a short sale if:

• The Mortgage Value has dropped
• The Mortgage is in or near default
• The seller is experiencing a Hardship (Unemployment, Divorce, Bankruptcy, Illness)

Because there is sometimes no rhyme or reason to a short sale, there are many scenarios where the seller offers their home for short sale, and a ready, willing and able buyer is found. But, while waiting for bank approval, the home is lost to foreclosure. This problem will only be exacerbated by the number of Adjustable Rate Mortgages adjusting in 2010. Any Real Estate Professional experienced in short sales will tell you that a lenders’ tendency not to respond promptly to short sale purchase offers is the biggest reason for failed short sale closings, which subsequently often lead to foreclosure.

But wait…What’s that? Is it a bird? Is it a plane? NO it’s HAFA! HAFA is not a new superhero although some distressed sellers and Real Estate Professionals may believe it is. HAFA stands for the federal Home Affordable Foreclosure Alternatives Act* and will become effective on April 5th, 2010. Among other things, HAFA:

• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds). This is HUGE!
• Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
• Uses standard processes, documents, and time frames/deadlines
• Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).

In order to qualify for HAFA, sellers may first need to attempt a loan modification through the Home Affordable Modification Program (HAMP). Qualifications to be eligible are:

• The property must be the borrower’s principal residence
• The mortgage loan is a first lien mortgage originated on or before January 1, 2009
• The mortgage is delinquent or default is reasonably foreseeable
• The current unpaid principal balance is equal to or less than $729,750 (for single-family home…higher amounts for 2 to 4 unit dwellings).
• The borrower’s total monthly mortgage payment exceeds 31 percent of the borrower’s gross income.

For Real Estate Professionals and distressed homeowners, HAFA is our friend. HAFA should remove some of the challenges that we have all experienced with working short sales.

If you are a Southeast Florida homeowner and would like assistance with starting a short sale process on your home, please call or email me.

* Home Affordable Foreclosure Alternatives Act:
On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA). HAFA is part of the Home Affordable Modification Program (HAMP). HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. Servicers participating in HAMP are also required to comply with HAFA. A list of servicers participating in HAMP is available at MakingHomeAffordable.gov.

HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks. HAFA is a complex program, with 43 pages of guidelines and forms, designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure.
HAFA:
• Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
• Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
• Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
• Uses standard processes, documents, and timeframes/deadlines.
• Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).
• Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.
The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements.
Take note, though, the program terminates on December 31, 2012. (Source National Association of Realtors – NAR)

Please complete the form below and someone will get back to you as quickly as possible. I specialize in short sales for Sellers and can find Short Sales and Foreclosure properties for Buyers.

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