This column has given consideration and attention in previous issues to the matter of distressed properties where homeowners are either in default or are in immanent danger of defaulting on their mortgage loans. The Short Sale status is often referred to as a pre-foreclosure condition. It reflects a situation where the owner owes more on the property than what the current market value would indicate it is worth.
The process of working a Short Sale has been drawn out and uncertain for way too long. Borrower/Sellers have tried to get the home sold to prevent foreclosure. Purchasers have tried to take advantage of the selling situation and make a purchase that makes economic sense in these difficult market times. But the procedures that have been employed by lenders who hold the notes of the indebtedness have not had stipulations of how or when action must be taken to approve or even respond to offers submitted in good faith and with high hopes of having results of a closing and a relief of the debt.
This week, the industry got a glimmer of hope for simplifying the process when the U.S. Treasury set some long-awaited guidelines with a plan for mortgage companies to speed up the process. Guidance was given for loan modification alternatives to help avert the involuntary loss of home ownership through foreclosure, a condition that has struck as mighty avalanches in flu-like epidemic proportion.
In a press release and notice December 2, 2009 to its members, the National Association of REALTORS® provided some summary information of the announcement by the Treasury Department November 30th. The following are some key points summarized and issued by the NAR'S Real Estate Buyer's Agent Council, REBAC, to help educate professionals on this very sensitive topic. The Treasury's new Home Affordable Foreclosure Alternatives program (HAFA) is part of the Home Affordable Modification Program (HAMP). HAFA provides incentives in connection with short sale or deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. 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. Here are a few important highlights of the guidelines just released:
* Some notes interpreted from the announcement provide that mortgage servicers will have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt of the first mortgage (no cash contribution, promissory note, or deficiency judgment is allowed)
* Borrower financial and hardship information already collected in connection with consideration of a loan modification are to be used
* Allow borrowers to receive pre-approved short sale terms before listing the property (including the minimum acceptable net proceeds)
* Servicers are prohibited from reducing real estate commissions agreed upon in listing agreements
* Standard processes, documents, and timeframes/ deadlines will be effected
* Monetary incentives will continue to be in effect for servicers to encourage expediting the process and allowances to investors and lien holders.
* The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements
* The program sunsets on December 31, 2012
While this information is deemed to be accurate and is received with great excitement, anticipation and expectation, caution is given to verify all sources; there is yet much that needs to be clarified and procedures systematized. This is not intended to be a basis for legal counsel or tax advice and consumers are encouraged to seek competent counsel suited to individual circumstances.
St. George REALTOR® Jim Coleman is Associate Broker and Partner/Owner of ERA Brokers Consolidated. He Specializes in Residential, Investment and Commercial Real Estate, holding National Designations of Accredited Buyers Representative (ABR), Certified Residential Specialist (CRS), Resort and Second Home Property Specialist (RSPS), Seniors Real Estate Specialist (SRES) and NAR's GREEN designation. He recently completed the Short Sale and Foreclosure (SFR Certification) program. You can contact him by e-mail at Jim@JimColeman4Homes.com. Call: (435) 674-0600; or write: Jim Coleman, 201 East St. George Boulevard, St. George, Utah 84770. This and other columns are available at www.WinningTalk.com/articles.