HAMP, HARP and Phoenix Short Sales

Loyal reader Kyle had me scrambling through the rabbit hole that holds the Obama administration’s various housing and stimulus acronyms, trying to figure out if last week’s announced short sale guidelines were going to be totally useless here in Phoenix.

The preliminary assessment, assuming for the moment that lenders elect to follow these guidelines (it’s an opt-in kinda thing), is that it’s possible.

For a loan to be considered under the new short sale guidelines, it must be HAMP-eligible – HAMP being the Home Affordable Modification Program. The criteria here aren’t too terribly oppressive:

  • The mortgage loan must have originated on January 1, 2009, or earlier.
  • The home must be an owner-occupied, single family 1-4 unit property.
  • The home must be a primary residence, not an investor-owned property.
  • The home may not be vacant or condemned.
  • Borrowers in bankruptcy are not automatically eliminated from consideration.
  • Borrowers in active litigation regarding the mortgage loan can qualify for a modification without waiving their legal rights.
  • First mortgage loans must have an unpaid principal balance equal to or less than:
    • Single-unit property: $729,750.
    • Two-unit property: $934,200.
    • Three-unit property: $1,129,250.
    • Four-unit property: $1,403,400.
  • There is no minimum loan-to-value ratio for eligibility purposes.

There are a few others but the last one, with my emphasis added, is they key as far as the Phoenix real estate market is concerned. For HAMP, there is no minimum loan-to-value requirement. That’s in contrast to HARP – the Home Affordable Refinance Program, which says the total loan to value can’t be more than 125 percent (up from the original 105 percent when the program was announced.) For that reason, HARP’s pretty useless in an area where we’ve taken a close to 40 percent hit across the Valley, varying depending where you happen to be.

It would seem the reason HARP has an LTV requirement where HAMP doesn’t is the nature of the two programs. HARP deals with refinances of a property, and if a home’s too far underwater than the government isn’t ready to coerce the banks into taking the chance. HAMP is loan modification – new money isn’t being added to the pot; the lender is being encouraged to find a way to help the homeowner afford the home, whether it’s through extended loan periods or other methodology.

Of course, that’s neither here nor there for Phoenix short sales. And if the lenders don’t agree to buy in to the program, the entire concept is for naught. One of the sticking points, as it always seems to be, could be the junior lienholders who despite facing the distinct chance of receiving absolutely nothing if a homeowner is foreclosed upon by the primary lender still manages to bog down the short sale process demanding more money.

Reminds me vaguely of the City of Glendale’s insistence that they will not renegotiate the terms of the hockey lease of Jobing.Com Arena because the city’s depending on the revenue, all the while ignoring that reality that the Phoenix Coyotes moving would leave the city with zip. Folly.

Will the minor payout be enough to keep the junior lienholders at bay? Only time will tell.

Program starts next April.

[tags]Phoenix real estate[/tags]

About Jonathan

Jonathan Dalton is a 30-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.

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  • So I’m not sure if this is across the board or the individual banks need to agree with HAMP first? I see a lot of homes trying to “short-sale” that are vacant and will now have to assume this means it will never get short-sale approval.

    More than ever knowing who holds the loan will be a valuable question to ask a listing agent.

  • Kyle

    Well researched sir, thank you. I wonder if there was any type of drug on the brains of pepole who come up with these acronyms…