Short Sale Information

What is a Short Sale? A real property sale where the total sales proceeds are less than the total balance due against the property, including the costs of sales. Short sale is not automatic. The lender must approve a short sale before the homeowner can sell the property short of what is owed on the principal balance. Homeowners are advised to hire a real estate agent to sell their property, when it will have to be sold as a short sale.

What is a Hardship? A homeowner normally have to show that they are in a hardship in order to get the lender to agree to a short sale. Examples of Hardships: Loss in job/income, loss of a family member, location out of area, death of a family member, unexpected medical expenses, etc.

Short Sale - Hardship letter : (sample) --THIS IS A SAMPLE HARDSHIP LETTER: There are several hardships that homeowners are running into. Probably no two homeowners have the very same hardship or events leading up to that hardship. Hopefully this sample will fit your needs as a sample and a way to get started writing your hardship letter. Although Short Sales are changed a little, this hardship letter is still very important to getting your short sale approved.

** Please note. The Short Sale Process is due to change - Effective April 5, 2010 for most servicers. Any questions or if you need a Real Estate Agent to List and Sell your property, give me a call at 209-217-6217.

What is HAFA?

Home Affordable Foreclosure Alternative (Short Sale), under the HAMP (Home Affordable Mortgage Program (Loan Modification) – which is all a part of the Making Home Affordable Program for Homeowners.

HAFA is the short sale portion. Homeowners will need to first try to get a loan modification. In order to do a short sale the homeowner will need to be either approved but failed the program, denied or simply cannot afford the loan modification in order to move to the short sale process. If homeowner does not take this first step, the servicer will not approve the short sale. This new HAFA program is effective April 5, 2010 – although some lenders are on board and doing it now.

Call your lender and let them explain the program to you and get the proper form to get started.

Here is a list of questions and answers that may help understand HAFA:

What is it that we know about … HAFA - (the NEW - Short Sale Program)

~~ QUESTIONS ~~

~~ ANSWERS ~~

What is the Effective Date?

April 5, 2010 * some servicers are using the new process now

What does HAFA stand for?

Home Affordable Foreclosure Alternative

What are the REQUIREMENTS to qualify?

Must be homeowner’s primary residence

Loan must have originated before Jan 1, 2009

Must have applied for the HAMP Loan Modification and either been denied, approved but failed, can’t afford it

Loan is a 1st lien mortgage

Mortgage is delinquent or default is reasonably foreseeable

Current unpaid balance is equal to or less than $729,750

Borrower’s total monthly mortgage payment exceeds 31% of borrower’s gross income

Name some BENEFITS

Sets limits on lender response time * speeds up short sale process

Lender forfeits ability to pursue deficiency judgment from homeowner

Caps claims of subordinate lenders * while 2^nd must be in agreement and release their lien, they have a cap of claim towards the homeowner

Offer incentives * across the board to homeowners, servicers and investors

More organized than old process, less stress

Are all lenders on board?

We hear there are at least 75 on board

Can more jump on board before or after 4/5/10?

According to original rules – Deadline was 12/31/09 for lenders to sign up for HAMP. Lenders must buy in to HAMP in order to do HAFA (subject to change)

Is it for 1^st and / or 2^nd lien?

No just 1^st lien – Non-GSE Mortgages

Who are the GSE Mortgages

Fannie Mae, Freddie Mac…

Are there incentives for the borrowers, servicers and investors?

Yes all * it is also stated the if homeowner have a lien on the property – the incentive can be used to help pay that off – since escrow cannot close with any outstanding liens on the property

Will borrower have to submit the same paperwork as the old process

No, except updating – the lender will be able to utilize borrower’s financial information that was submitted through HAMP

What do you mean submitted through HAMP

Submitting through HAMP is Step 1 of the process. The homeowner/borrower has to submit and request a loan modification first. Either approved and failed the loan modification, denied or can’t afford it in order to move to Step 2 – HAFA (short sale)

So what happens to 2^nd lien?

Homeowner must work with 2^nd lien holder to get a release of the loan in order to move forward with a short sale

Who set the list/sales price?

The servicer inform the homeowner what they will take as a short sale

How long does the homeowner have to list and request a short sale?

Starts off 3 months – all efforts must be proven to have been taken (homeowner hired a professional real estate agent to list and sell the property); if it does not work within the 3 months, the homeowner can request an extension to sell up to 12 months.

What is a DIL (Deed in Lien of foreclosure)? And can the homeowner jump over the short sale to do a DIL?

Not suppose to work like that.

Loan Modification request first

Short Sale attempt second

And Servicer does have the option to offer a Deed in Lieu of if short sale fails – not a requirement

Will this STOP FORECLOSURES?

No, there will still be a number of foreclosures if all other options fail. There will also be a number of Homeowner Walk A-way too.