By: Joy Leopold 01/07/2011
Perhaps as a response to reports and complaints that the government-sponsored Home Affordable Foreclosure Alternatives (HAFA) program was not working as efficiently as hoped, the Treasury Department has released updated guidelines for the program.
In mid-December, the California Association of Realtors (CAR) submitted a letter to the Treasury and other governmental agencies on behalf of its members, outlining specific problems with and suggested solutions for HAFA.
The letter, which spanned four pages, outlined issues Realtors were having with the program, including the failure of lenders to comply with HAFA timelines and general rules, and the lack of uniformity in guidelines for all HAFA programs. Additionally the letter suggested raising the monetary incentive for servicers, investors and subordinate lien holders, citing the low payout as a common reason that HAFA short sales are rejected.
The letter also recommended that HAFA short sales be the required short sale method for servicers, in order to make all short sale processes equal and uniform.
The directive published two weeks later by the Obama administration becomes effective February 1, 2011, although servicers are encouraged to implement the changes immediately.
The new rules do address some of the issues outlined in the CAR letter, as well as many other matters.
Under the new guidelines, servicers are no longer limited by the 6 percent cap with respect to payments to the subordinate lien holders.
Additionally, servicers are now required to complete and send to the borrower a Short Sale Agreement (SSA) no later than 30 calendar days from the date the borrower responds to the HAFA solicitation. If the borrower requestsHAFA consideration, the servicer must respond within 30 days.
In addition to these rules, servicers are no longer required to verify a borrower’s financial information to determine a borrower’s HAFA eligibility, nor is it necessary to determine if the borrower’s total monthly mortgage payment is more than 31 percent of his monthly gross income.