Short Sale Help - HAFA

As you may have heard by now, the Federal Government has come up with guidelines that are designed to simplify the process of short sales.

Simplify may seem an odd choice of words given that the document explaining this program is 43 pages!

You can read all about HAFA for yourself. But if you're not inclined to dig into those 43 pages, here's a short version.

HAFA will provide incentives to lenders to make the short sale process easier. The steps the lenders are asked to take include:

• Approve short sale terms prior to listing.
• Standardize processes, documents and timeframes.
• Requires borrowers must be fully released from all future liability.
• Prohibits servicers or lenders from intervening to ask for real estate commission reductions.
• Allows use of data already collected in the course of examining eligibility for loan modification.

In return, servicers and lenders get financial incentives:

• $1500 for borrower relocation assistance
• $1000 for servicers to cover processing costs
• $1000 for investors for allowing up to $3000 in short sale proceeds to be distributed to subordinate lien holders.

The program begins April 5th, 2010.

I can't tell you if this program will work. I imagine there will be successes, but my hunch is that the number is small. Once again, this is a voluntary program. Lenders overall haven't shown much inclination to jump into anything that's voluntary and that isn't favorable to their bottom line. If this program is different, I haven't yet seen why.

Still, I applaud any effort by anyone to make the short sale process less painful. Short sales seem likely to be a large percentage of transactions for the foreseeable future. Or, you could see more homeowners decide it isn't worth the hassle and just walk away.

Clearly there's an incentive for everyone to fix this process!