Many home owners are in financial distress and owe more than their home is worth. In this case, selling their home will not net enough proceeds to pay off their current mortgage. Often, the only option is a “short sale,” in which their lender agrees to accept less than a full payoff to release the mortgage.
HAFA is a Federally sponsored program providing incentives to lenders that agree to short sales. A short sale is a long, difficult process requiring weeks if not months of negotiation with the bank to convince them to accept less than the full amount due. The goal of HAFA is to streamline and standardize the short sale process. HAFA, however, only applies to certain home owners and to lenders that participate in the program.
More importantly, HAFA did not apply to loans owned, underwritten, or guaranteed by Fannie Mae and Freddie Mac. This excluded a large number of loans… until now!
Fannie Mae and Freddie Mac Introduce Their Own HAFA Program
Fannie Mae and Freddie Mac recently announced their own entry into the HAFA Program. Both programs will likely be very similar to the original HAFA program. This development will open the door to a vast majority of distressed homeowners to utilize the HAFA Short Sale Program. And, this means that sellers, REALTORS, and attorneys must understand how the various programs work.
Like the original HAFA program, the Fannie Mae and Freddie Mac programs “piggy back” off of the HAMP Mortgage Modification program. Distressed homeowners must first apply for a mortgage modification under the federal HAMP program. And, like the original program, the new programs provide similar incentives to homeowners and lenders to close a short sale. Homeowners can receive up to $3,000 in “relocation assistance” for completing a short sale.
These programs have just been announced and are not yet in effect. Homestead will continue to provide updates prior to the August 1st implementation date.
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