The Home Affordable Foreclosure Alternatives (HAFA) program is expected to stabalize the residential real estate market by moving the short sale process forward at a rapid pace.
On April 5, 2010, HAFA will go into effect. The law expires at the end of 2012.
Under HAFA, borrowers receive pre-approved short sale terms before listing the property, as well as $1,500 in relocation assistance. In addition, they will be fully released from any future liability for the first mortgage debt. Qualification for HAMP are: property must be the principal residence, the first lien originated before 2009, the unpaid balance must not exceed $729,750 and the borrower’s total monthly payment exceeds 31% of their gross income.
HAFA will offer up to $1,000 in investor reimbursements for allowing up to $3,000 in short sale proceeds to be paid to subordinate lien holders. If a subordinate lien holder receives financial incentives from HAFA, they must agree not to pursue any deficiency judgments. This is a solution to the problems many sellers will be facing with their equity line of credit comming after them after the sale of their property.
The intent of this program is that the streamlined process for short sales now being put into place should render fewer foreclosures, helping to stabilize the housing market. The joining of most major lenders to Bank of America and Wells Fargo Bank practices for equity lending mortgages disposition during the short sale process should releif a major problem for sellers.
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