There’s an e-mail making the rounds explaining to agents how much easy short sales have become thanks to new rules imposed by President Obama’s HAFA (Home Affordable Foreclosure Alternative) program. That the e-mail is produced by a company wanting to “connect” real estate agents with distressed homeowners apparently hasn’t raised the skepticism meter in some corners of the world.
Here’s what changed, according to the good folks at the Hogan real estate school (and I mean that – they’re good people):
Deletion of the requirement that a borrower’s payment exceed 31% of their gross income;
Increasing the allowable vacancy period from 90 days to 12 months and deleting the requirement that the borrower’s move be job related;
Deletion of the 6% of principal balance that subordinate lien holders may receive. A maximum of $6,000, in aggregate, may still be paid to all subordinate lien holders but the servicer has the discretion of paying some or all of it to the subordinate lien holder(s). For example, on a $50,000 second lien, $3,000 was the maximum the servicer could pay the second lien holder under the old rules. Now the second can receive up to $6,000.
Servicers will be required to determine a borrower’s HAFA eligibility and issue or deny the SSA within 30 calendar days of receipt of all documents;
Servicers will be required to approve, disapprove or counter a short sale contract submitted with an Alt. RASS within 30 calendar days of receipt of all documents;
Servicers who accept a deed-in-lieu of foreclosure may allow the borrower to lease-back the home or re-purchase it at some future time.
There’s good in there, such as no longer requiring that a borrower’s move be job related.
And then there’s also the change that inevitably is going to be twisted to make it seem like short sale approvals will take place in 30 days. (As happened in that e-mail already being printed in full as if it were fact.)
Servicers will be required to determine a borrower’s HAFA eligibility and issue or deny the SSA within 30 calendar days of receipt of all documents.
Loan servicers will not be required to approve a short sale within 30 days, they simply have to determine whether a borrower is HAFA eligible. (The SSA mentioned only is the short sale listing agreement, not an actual contract.)
Are these changes so monumental that I believe it’s prudent to move off the stance that short sales should be abolished? Not at all.