March 2010 Update

                     HAFA and HAMP            

The Treasury Department is now offering a new program supporting the banks on doing short sales with the Home Affordable Foreclosure Alternatives Program (HAFA). This is the latest program under the Home Affordable Modification Program (HAMP), designed to offer alternatives to homeowners facing foreclosure. 

THE HAFA PROGRAM:

The above program is now coming on to compliment the HAMP (Home Affordable Modification Program) program that was put into place by the Obama administration last year. Only a very small percentage of homeowners have been able to qualify for the HAMP program because the guidelines for qualifying are very tight.

Conveniently 6 months before an election period HAFA is rolling into the picture to make it easier for the banks to do a short sale or a deed-in-lieu. The government program is only going to help those who have tried to qualify for a loan modification under HAMP and didn't get approved. Also, unfortunately they are supposedly offering this program to homeowners who are current on their mortgages and have a legitimate hardship, but many banks will not even look at "helping out" the homeowner unless they are at least 60 days late on their mortgage payments. The homeowner has to totally wreck their credit to get the banks attention.

What does this mean to the homeowner? 

This can possibly shorten the period the short sale process and completely giving the homeowner an out and FULL SATISFACTION on any debt owed to the bank from when the short sale is approved. The difference between a normal short sale and the HAFA program is the lender is completely on board with accepting a less amount (with incentives from the government), to work with the homeowner to avoid a more expensive alternative, the foreclosure. There are also other guidelines like the loan balance cannot exceed $729,750 and the homeowner's mortgage has to exceed 31 percent of their gross monthly income. The guidelines are very similar to the ill-fated HAMP program.

Bottom Line-The banks still are not set up for the numbers of homeowners that are trying to qualify for either program. As many homeowners are experiencing rejection of a loan modification after many attempts to get one approved so they can stay in their homes. That was what the Obama administration was trying to do in the first place with TARP last year was keep the homeowner's in their homes and the banks afloat. There are seven plus million homes right now across the nation are in default and the number is expected to grow with the credit card crunch. Many of the crutches people had (like using their credit cards for everyday necessities) have evaporated leading to not many alternatives to the typical underwater homeowner.

The spoiler of HAFA can be the MI (Mortgage Insurance) companies and the HELOC loans (non purchase) that were taken out on many homes after the original closing of the property. These two are digging their heals in and many times refusing the short sale all together! Remember, the banks legally do not have to do either program! The reality is the banks are going to have to catch a clue and start gearing up to make it easier for a homeowner to do the short sale vs. the foreclosure because they stand to keep the properties in better shape and lessen the loss. The MI and the HELOCS (junior liens) need to wise up and accept something instead of nothing if the home goes to foreclosure.

The easiest bank to deal with right now is Wachovia (formally World Savings). They actually now have agents that they have hired to physically meet with the homeowner (seeing the neighborhood and condition of the property) and go over their hardships to streamline the ease of the short sale. They also are providing the Realtors short sale packages to get the property on the market and sold within a 30 day bank approval turn around. What will be interesting to see is if the other banks will finally figure out it is best to work with the homeowner then make it so difficult that they homeowner throws their key up and in the air and walks out!

The winner is?  Neither the homeowner nor the bank is really benefitting from the programs. The only real winner right now is the new buyer who gets the property at real fair market value. The debate is yet to come if it will be seen this way after the government takes the tax credit incentives off the table April 30th, 2010. There could be even more astronomic repercussions after the elections in November when the HAFA program is only mildly successful like the HAMP program or when the government takes away the real estate safety nets.

Tiffany Torgan~Broker/Realtor, San Diego, California

San Diego Real Estate and Relocation Specialist

Prestige Properties Realty

www.relosandiego.com

www.prestigepropertiesrealty.com

(858) 459-5478 Office/ (858) 504-8433 Cell

CA DRE license # 01276329