The following chart provides definitions and differences for various terms and concepts you may encounter in short sales and foreclosures. For a brief explanation of the HAFA Process, see HAFA Explained – The New Federal Short Sale Program. The National Association of Realtors also provides excellent information and resources. These definitions and terms are a broad-brush attempt to offer clarity and understanding. Many terms only apply to Wisconsin.
Term or Concept |
Traditional Short Sale |
HAFA Short Sale |
Foreclosure |
HAMP | N/A | Mortgage Modification program through the Making Homes Affordable initiative. HAMP may be required for a HAFA Short Sale. | HAMP Loan modification may be an alternative to foreclosure. The program has been unsuccessful for most home owners. |
HAFA | N/A | The short sale program offered through the Making Homes Affordable initiative. HAFA is designed to be a short sale alternative when a loan modification fails. | N/A |
SSA Short Sale Agreement |
SSA Only Applies to HAFA: Lenders do not agree to a traditional short sale until the end of the process, only after approving all application materials AND the offer to purchase. |
SSA is the Lender’s Agreement that outlines the short sale for the home owner. This is agreed to at the time of listing. |
N/A |
RASS Request for Approval of Short Sale |
RASS Applies to HAFA: Request for short sale approval is a long drawn out process of submitting information and often resubmitting it many times. |
The Seller or REALTOR submits the RASS within 3 days of having an accepted offer. The lender than has 10 days to approve or deny the request. If approved, lender must close when buyers are ready. |
N/A |
Term or Concept |
Traditional Short Sale |
HAFA Short Sale |
Foreclosure |
Principle Residence | Can do short sale if not principal residence. May have federal income tax consequences for amounts the lender does not collect. | The home must be the seller’s principal residence to qualify for HAFA. | N/A |
Timing | Wildly varies, but “Short” does not usually describe the length of time. 3-18Months to complete. | Much faster than traditional short sale.
Less than 60 days From application to approval. Lender has 10 days to approve any accepted offer. Can close within normal timelines once the offer is approved. |
Foreclosures in Wisconsin can take 8-12 months where a seller does not contest the foreclosure (default judgment). It can take longer if the seller answers the complaint. I can take less time for abandoned or commercial property. |
Default | The missed mortgage payment that leads to the filing of a foreclosure | ||
Deficiency | Lender may or may not demand a deficiency. The Deficiency is the amount of money the lender is still owed. | Lenders cannot demand deficiency. | First Mortgage holders generally waive their right to a deficiency in order to speed up the process. 2nd or 3rd lenders usually still retain a right to deficiency. |
Term or Concept |
Traditional Short Sale |
HAFA Short Sale |
Foreclosure |
Loan Types and Underwriters | Virtually all lenders and underwriters will do short sales. Every lender or underwriter has different standards. | Only applies to non-GSE loans, meaning NOT Fannie Mae or Freddie Mac.
Only applies to lenders participating in the HAMP Program. |
All lenders can file foreclosure actions. |
Mortgage Payments | Sellers generally do not pay mortgage payments during the foreclosure and short sale process. Essentially, they are there “rent free.” | Sellers must continue making mortgage payments, but not more than 31% of their gross income. |
N/A |
Commission | Lender may negotiate to reduce it. Many investors and programs now require 6% if that is written in listing agreement. | Requires servicers to honor listing agreement if commission does not exceed 6% | N/A |
REALTOR | Anyone can participate in a traditional short sale, including FSBO’s, Investors, or non-licensed individuals | HAFA short sales MUST be listed with a REALTOR. | N/A |
Term or Concept |
Traditional Short Sale |
HAFA Short Sale |
Foreclosure |
Initiating Short Sale Process | Seller, Realtor, or Attorney calls lender, but process generally starts once a Buyer accepts the offer. Process initiated by sending short sale “package.” | Seller calls lender and requests HAFA Short Sale. Lender must proactively offer short sale to individuals who try and fail at HAMP. May require application for HAMP first (although new guidelines allow for direct application for Short sale). | N/A |
Cash at Closing | Sellers are rarely allowed any cash at closing. Many lenders require the seller to bring money to closing | Lenders can offer up to $3,000 as a cash incentive for sellers to do a HAFA short sale. | N/A |
Credit Consequences | Consult a financial advisor or credit counselor. Short sales can have a significant impact on credit. | Consult a financial advisor or credit counselor. Short sales can have a significant impact on credit. | Consult a financial advisor or credit counselor. Foreclosure will be a significant impact on credit. |
Thanks for providing this breakdown. It’s a great list for home owners!
You just have to utilize through online mode by filling
up an e-form with many data like name, address, checking account
number etc the credit gets deposited to your account within a day of acceptance.
It is always advisable to know the charges that is going to
be charged for the money application before submitting the
application.
Hello! This is my first comment here so I just wanted to give a quick shout out and tell you I
truly enjoy reading your blog posts. Can you suggest any
other blogs/websites/forums that go over the same
topics? Thank you so much!
excellent post, very informative. I ponder why the
opposite experts of this sector do not realize this.
You must proceed your writing. I am confident, you’ve a huge readers’ base
already!