(as f 12/11/09) 1. What is HAFA? Initially annunced n May 14, 2009, with guidance and standard frms issued n Nvember 30, 2009, the prgram will help wners (referred t belw as brrwers) wh are unable t retain their hme under the Hme Affrdable Mdificatin Prgram (HAMP). A brrwer (the current wner) may be able t avid a freclsure by cmpleting a shrt sale r a deedin-lieu f freclsure (DIL) under HAFA. The guidance and frms released n Nvember 30 d nt apply t lans wned r guaranteed by Fannie Mae r Freddie Mac. Thse enterprises will issue their wn HAFA guidance and frms. 2. Wh is eligible? The brrwer must meet the basic eligibility criteria fr HAMP: Principal residence. First lien riginated befre 2009. Mrtgage delinquent r default is reasnably freseeable. Unpaid principal balance n mre than $729,750 (higher limits fr 2 t 4 unit dwellings). Brrwer s ttal mnthly payment exceeds 31% f grss incme. 3. Hw is the prgram being implemented? Supplemental Directive 09-09 (Nvember 30, 2009) gives servicers guidance fr carrying ut the prgram. All servicers participating in HAMP must als implement HAFA in accrdance with their wn written plicy, cnsistent with investr guidelines. The plicy may include such factrs as the severity f the lss invlved, lcal market cnditins, the timing f pending freclsure actins, and brrwer mtivatin and cperatin. Shrt Sale Agreement (SSA). The servicer will send this t the brrwer after determining the brrwer is interested in a shrt sale and the prperty qualifies. It infrms the brrwer hw the prgram wrks and the cnditins that apply.
Request fr Apprval f Shrt Sale (RASS). After the brrwer cntracts t sell the prperty, the brrwer submits a RASS t the servicer within 3 business days fr apprval. Alternative RASS. If the brrwer already has an executed sales cntract and asks the servicer t apprve it befre an SSA is executed, the Alternative RASS is used instead. The Servicer must still cnsider the brrwer fr a lan mdificatin. 4. Hw will HAFA imprve the shrt sales prcess? HAFA: Cmplements HAMP by prviding a viable alternative fr brrwers (the current hmewners) wh are HAMP eligible but nevertheless unable t keep their hme. Uses brrwer financial and hardship infrmatin already cllected in cnnectin with cnsideratin f a lan mdificatin under HAMP. Allws brrwers t receive pre-apprved shrt sales terms befre listing the prperty (including the minimum acceptable net prceeds). Prhibits the servicers frm requiring a reductin in the real estate cmmissin agreed upn in the listing agreement (up t 6 percent). Requires brrwers t be fully released frm future liability fr the first mrtgage debt (n cash cntributin, prmissry nte, r deficiency judgment is allwed). Uses standard prcesses, dcuments, and timeframes/deadlines. Prvides financial incentives: $1,500 fr brrwer relcatin assistance; $1,000 fr servicers t cver administrative and prcessing csts; and up t $1,000 match fr investrs fr allwing a ttal f up t $3,000 in shrt sale prceeds t be distributed t subrdinate lien hlders (n a ne-frthree matching basis; up t 3% f the unpaid principal balance f each subrdinate lan). 5. What are the timelines fr HAFA? Based n a servicer s written plicy, the servicer must cnsider every ptentially eligible brrwer fr HAFA.
If a servicer has nt already discussed a shrt sale r DIL with the brrwer, it must ntify the brrwer in writing f these ptins and give the brrwer 14 calendar day t respnd, rally r in writing. If the brrwer des nt respnd, that ends the servicer s duty t give a HAFA ffer. Servicers must cnsider HAMP-eligible brrwers fr HAFA within 30 days after the brrwer des at least ne f the fllwing: Des nt qualify fr a HAMP trial perid plan. Des nt successfully cmplete a HAMP trial perid plan. Is delinquent n a HAMP mdificatin (misses at least 2 cnsecutive payments). Requests a shrt sale r DIL. The brrwer has 14 calendar days frm the date f the Shrt Sale Agreement t sign and return it t the servicer. The Shrt Sale Agreement must give the brrwer an initial perid f 120 days t sell the huse (extensins permitted up t a ttal f 12 mnths). Within 3 business days f receiving an executed purchase ffer, the brrwer (r agent) must submit a cmpleted RASS t the servicer, including (i) a cpy f the sale cntract and all addenda; (ii) buyer dcumentatin f funds r pre-apprval/cmmitment letter frm a lender; and (iii) all infrmatin n the status f subrdinate liens and/r negtiatins with subrdinate lien hlders. Within 10 business days after the servicer receives the RASS and all required attachments, the servicer must apprve r deny the request and advise the brrwer. The servicer may require the clsing t take place within a reasnable perid after it apprves the RASS, but nt sner than 45 days frm the date f the sales cntract unless the brrwer agrees. The servicer must release its first mrtgage lien within 10 business days (r earlier if required by state r lcal law) after receipt f sales prceed frm a shrt sale r delivery f the deed in the case f a DIL. Investr must waive rights t seek deficiency judgment and may nt require a prmissry nte fr any deficiency.
6. What are the HAFA rules re real estate cmmissins? The guidance states that a servicer may nt require a reductin in the real estate cmmissin belw the amunt stated in the Shrt Sale Agreement. The SSA states that the servicer will pay the cmmissin as stated in the listing agreement, up t 6%. If the servicer has retained a vendr t assist the listing brker, the vendr must be paid a specified amunt frm the cmmissin. Neither buyers nt sellers may earn a cmmissin in cnnectin with the shrt sale, even if they are licensed real estate brkers r agents. They may nt have any side deals t receive cmmissin indirectly. 7. What are the required clauses fr the listing agreement? Cancellatin clause seller may cancel withut ntice and withut paying cmmissin if prperty is cnveyed t mrtgage insurer r mrtgage hlder. Cntingency clause sale is subject t written agreement f all sales terms by the mrtgage hlder and, if applicable, mrtgage insurer. 8. Hw much are the incentive payments? Brrwer Relcatin Incentive--$1,500, paid t the brrwer at clsing. Servicer Incentive--$1,000 fr administrative and prcessing csts fr a shrt sale r DIL cmpleted under HAFA. Investrs may prvide additinal incentives. Investr Reimbursement fr Subrdinate Lien Releases up t $1,000 fr allwing up t $3,000 in shrt sale prceeds t be paid t subrdinate lien hlders. Subrdinate lien hlders that receive HAFA incentive must agree nt t pursue deficiency judgments. 9. D servicers have t treat similarly situated brrwers the same? Yes, but nt all brrwers will qualify fr a shrt sale r DIL. Participating servicers must have a written plicy, cnsistent with investr guidelines, that describes the basis fr deciding whether t g ahead with a shrt sale in individual cases.
The plicy may include such factrs as the severity f the lss invlved, lcal market cnditins, the timing f pending freclsure actins, and brrwer mtivatin and cperatin. 10. What are the steps fr evaluating a lan t see if it is a candidate fr HAFA? Brrwer slicitatin and respnse. Assess expected recvery thrugh freclsure and dispsitin cmpared t a HAFA shrt sale r DIF. Use f brrwer financial infrmatin frm HAMP. (May require updates r dcumentatin.) Prperty valuatin. Review f title. Brrwer ntice if shrt sale r DIL nt available (t brrwers that have expressed interest in HAFA). 11. Can the servicer cmplete a freclsure during the HAFA prcess? N. A servicer may initiate freclsure, but may nt cmplete a freclsure sale: While determining brrwer s eligibility and qualificatin fr HAMP r HAFA. While awaiting the return f the Shrt Sale Agreement by the 14 day deadline. During the term f a fully executed Shrt Sale Agreement (while the brrwer seeks t sell). Pending the transfer f wnership based n an apprved sales cntract per the RASS r Alternative RASS. Pending transfer f wnership via a DIL by the date specified in the SSA r DIL Agreement. 12. What abut DIL? Subject t investr requirements, servicers may accept a deed-in-lieu f freclsure under HAFA, which requires a full release frm debt and waiver f all claims against the brrwer. The brrwer must vacate the prperty by a specified date, leave the prperty in brm clean cnditin, and deliver clear, marketable title.
Same incentives available. 13. What else shuld I knw? The deal must be arms length. Brrwers can t list the prperty r sell it t a relative r anyne else with whm they have a clse persnal r business relatinship. The amunt f debt frgiven might be treated as incme fr tax purpses. Under a law expiring at the end f 2012, hwever, the tax may nt apply. Frgiven debt will nt be taxed if the amunt f frgiven debt des nt exceed the debt that was used t acquire, cnstruct, r rehabilitate a principal residence. Check with a tax advisr. The servicer will reprt t the credit reprting agencies that the mrtgage was settled fr less than full payment. There will be a negative effect n credit scres. Buyers may nt recnvey the prperty within 90 days after clsing. 14. When des the prgram end? Shrt Sale Agreements must be executed and returned t the servicer n later than 12/31/2012. 15. Where can I find the guidance and frms? G t www.realtr.org/shrtsales fr links t the guidance, these FAQs, a summary, and much mre infrmatin abut shrt sales.