By February 1, 2011 servicers, other than Fannie and Freddie, must make changes to their HAFA policies in order to be compliant with the Making Home Affordable Program. Through September 2010 only 342 HAFA short sales were completed and closed. Pretty pathetic for something with so much hoopla from big brother. With poor results in the past, the program has been revamped to open it’s eligibility to more borrowers and potentially improve the market. The Supplemental Directive 10-18 can be found here but for most a quick summary below might suffice.
Monthly Gross Income
Servicers are no longer required to verify the monthly mortgage amount exceeding 31% but may with their own policies. The hardship affidavit still applies.
The property still must be or recently have been the borrower’s principal residence but now it can be vacant or rented to a non-borrower for less than 12 months from the date of the Short Sale Agreement. Relocation stipulations have been removed.
Release of Subordinate Liens
The 6% cap on junior lien holders has been removed and replaced with a cap of $6,000. Investors will still be eligible for incentive reimbursement up to 1/3 of the cost to remove subordinate liens.
Issuance of Short Sale Agreement
Within 30 days of the servicer offering HAFA, the servicer must complete and send the Short Sale Agreement. If the borrower requests HAFA the servicer must respond within 30 days.
Response to Alternative Request for Approval of Short Sale
The servicer has 30 days from the receipt of an executed sales contract to approve, reject, or counter with the AltRASS form.
Listing commissions shall be paid to what the listing agreement says, not to exceed 6%. Third party negotiators, contractors, etc. shall not be paid from this commission.
D-I-L’s like deed-for-lease are qualified for HAFA relocation incentives.
Borrower’s may be notified of HAMP and HAFA eligibility simultaneously. This means no waiting through HAMP then waiting through HAFA back-to-back.
Borrowers can be re-evaluated for HAFA eligibility even if they have been denied, per the servicers re-evaluation policy.
Everything sounds nice but are servicers really going to quit doing the 31% debt to income if they don’t have to? Will these timelines actually be followed and if not is there any type of punishment?
Golden Ticket, no. A step in the right direction, yes.