Advice for buyers and sellers, from Justin Ruzicka

HAFA Short Sales

If you live in Florida or more specifically southwest Florida, in the towns and cities of; Cape Coral, Fort Myers, Estero, Bonita Springs, Naples or the surround beach towns of Fort Myers Beach, Sanbel Island and Captiva then you know how hard hit the has been on those living here.  You also know that one in three people are ‘underwater’ or more specifically their homes current mortgage is more than the fair market value  of their home.  That means if a person where to try and sell their home that is ‘underwater’ they would be short of paying off the mortgage at the time of sale.  You are not alone, in fact Millions of Americans today are ‘Underwater’ on their homes and some are facing foreclosure and all will have to revert to a Short Sale or Deed in Lieu of Foreclosure.  That is where the government program of HAFA comes into play.  BUT DON’T PUT IT OFF, because 2013 will be the last year that you will be able to waive the deficiency balance of the loan and not pay any taxes on that loss.  This is because of the Mortgage Debt Forgiveness Act of 2007 will be coming to an end.

The HAFA Program is an option to homeowners who:

(A) do not qualify for a loan modification(B) do not complete the trial modification successfully(C) miss two or more consecutive payments during a trial modification(D) request a deed-in-lieu of foreclosure or short sale

(239) 699-0517– A Live Person will answer the phone and answer your SHORT SALE OR HAFA RELATED questions.

Benefits and Requirements of the HAFA Program–Updated March 2012:

• $3,000.00 in relocation assistance to the borrower at closing
• Full debt forgiveness on all mortgages (both 1st and 2nd)
• No promissory notes
• No cash contributions
• 2nd liens can now get up to $8,500. (It was $6,000).This provides consistency for all parties involved
• Submittal of a short sale package and HAFA application prior to having an offer to get the process started (this provides a head start)
• Foreclosure will be delayed for at least the duration of the approved HAFA period which is no less than 120 days
• The deadline for HAFA has been extended. A borrower now has until December 31, 2013 to submit a Short Sale Agreement or a written request for a consideration for a Short Sale Agreement to be eligible for HAFA.
• There are no longer any occupancy requirements for HAFA eligibility. (Before the update the property had to be occupied as the borrower’s primary residence at some point within the prior 12 months).
• Servicers can now accept a full payment if the borrower requests to make a full contractual payment in order to stay current on the loan.

When the program came out in April 2010 it was for the most part very unsuccessful.  Not only did it have strict requirements such as the mortgage having to amount to more than 31% of the borrower’s income, and the borrower having to be currently living in the home, but all the servicers were lost on how to get them done.

In January 2011, the Treasury came out with Update 10-18, which included a change where servicers were no longer required to verify a borrower’s financial information or to determine if the borrower’s total monthly mortgage payment exceeded 31 percent of the borrower’s monthly gross income.

This update was very effective and dramatically increased the amount of HAFA short sales being approved. In addition, the lenders also improved their processes to approve these HAFA short sales.

Another change was introduced in August 2011 called Update 11-08, which had even more advantages to the borrower:

  • Servicers may still consider a borrower for HAFA whether or not the borrower responds to the HAFA solicitation letter  within the 14 day response period
  • Clarifies that the $3,000 in relocation money can be used by the borrower to pay certain bills at the closing that the borrower chooses such as municipal utility bills or any other transition costs
  • Highlights that servicers are allowed to accept a purchase offer that results in a lower net proceed than the minimum acceptable when the servicer determines it is in the best interest of the investor just like any other short sale
  • Servicers must periodically re-evaluate property values and market data provided by the borrower or borrower’s real estate broker

Fannie Mae and Freddie Mac still have not publicly adopted these updates, which is unfortunate, but it does seem as if they have loosened their own internal rules with respect to HAFA as we are getting more and more of them approved.

We have also conducted HAFA short sales with every major servicer such as Bank of America, Citi, Chase, GMAC, Wells Fargo, Ocwen, and with multiple smaller servicers such as American Home Mortgage, Litton, , Wachovia, and Bank United, Nationstar Mortgage.

It is clear that the Treasury has worked very hard to make HAFA a successful program and they have accomplished just that.  This is a great program that more distressed homeowners should be taking advantage of.

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Justin Ruzicka, Realtor
Justin Ruzicka, RealtorThe House Guy
Much of my real estate career has been in buying, repairing, then selling the properties for a profit. I work for specific investment groups doing this, as well as manage a personal portfolio. The other 50% of my business is helping my neighbors, I have helped dozens of Families buy or sell their home.

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