$1,500 for Homeowners to Prevent Foreclosure and Encourage Short Sales
March 10th, 2010 categories: Mortgages & Finance, Real Estate Industry
Beginning April 5, 2010, homeowners in trouble will get a little assistance to prevent foreclosure. HAFA (Home Affordable Foreclosure Alternatives) will encourage banks (by giving them $1,000) and homeowners (by giving them $1,500) to figure out a solution other than foreclosure. The program refers to the money for homeowners are “relocation assistance.”
We all know, foreclosure is bad. Your credit score can drop by as many as 300 points and will prevent you from buying another home for several years. Homeowners face deficiency judgements. Property values in the surrounding neighborhood are negatively impacted. Vacant bank-owned properties invite crime and vandalism.
However, until this recent directive by the US Treasury Department, avoiding foreclosure has been difficult. The loan modification and refinance programs (HAMP) have had some impact but many homeowners don’t qualify. And if the homeowners get their bank to agree to do a short sale, the process can take months longer than a traditional sale and is much more complicated, so much so that homes can still end up in foreclosure.
HAFA also seeks to streamline the short sale process by setting up standards (imagine that!) to make short sales occur more quickly, which increases the marketability of short sales.
There are eligibility requirements:
Homeowners need to first go through the HAMP program to apply for a loan modification.
Home is a principle residence.
Mortgage originated prior to Jan. 2009.
Mortgage is owned or guaranteed by Freddie Mac or Fannie Mae.
Borrower is delinquent or will be in the foreseeable future.
Homeowner has a hardship.
Borrower’s total monthly housing payment exceeds 31 percent of gross income.
Unpaid principal does not exceed $729,750.
There are few things more important than getting it right. I really appreciated reading this and look forward for a revisit.