HAFA 2013 Guidelines

HAFA Guidelines for 2013.

Download a list of changes to the HAFA guidelines effective February 1, 2013

If you have a Fannie Mae or Freddie Mac backed loan, you are no longer eligible for HAFA.

The Fannie Mae and Freddie Mac Home Affordable Foreclosure Alternative (HAFA) program expired on December 31, 2012.

After December 31, 2012, Fannie Mae and Freddie Mac files will have to go through either a Cooperative Short Sale process or a Traditional Short Sale process. You may still be eligible for relocation assistance under these programs.

Check to see if you have a Fannie Mae or Freddie Mac backed loan:

Fannie Mae lookup: https://knowyouroptions.com/loanlookup

Freddie Mac lookup: https://ww3.freddiemac.com/corporate/
Updates to HAFA Guidelines effective February 1, 2013:

Pre-determined hardship: Borrowers who are 90 days or more delinquent and have a FICO score that is less than 620 will be deemed to have “pre-determined hardship.” Your lender do not need to further validate the hardship to approve the HAFA short sale.

Response Time: Your lender must respond within 30 days.

Resale Restrictions: Resale after 30 days is allowed. The current restriction on re-selling a property within 90 days after closing is being shortened to 30 days. From 31 to 90 days, the resale price cannot exceed 120% of the HAFA short sale price.

HAFA 2013 Short Sale Program Guidelines
—Borrower’s Responsibilities

If you do not have a Fannie Mae or Freddie Mac backed loan, and your lender participates in HAFA, these are your responsibilities under the HAFA program:

You have until 120 calendar days from the date of this letter to sell your property. During the short sale marketing period you may be required to complete additional documentation. After an offer is received you will need to send the contract and other offer documents to us.

As part of selling your property in a short sale, you have certain responsibilities. You must:

1. List the Property for Sale. List your property in “as is” condition for X amount OR your lender will accept a sales contract where the proceeds from the sale, less the expenses described as “Subordinate Lien Releases”, “Relocation Assistance”, and “Allowable Costs”, nets X. Your lender is not responsible for the accuracy of the list price and has no responsibility to you in the event the property is not sold. They may require you to adjust the list price or other offer terms. You can’t list the property with or sell it to anyone that you are related to or have a close personal or business relationship with. In legal language, it must be an “arm’s length transaction.” Any knowing violation of this requirement may violate federal law. If you have a real estate license you can’t earn a commission by listing your own property. You may not have any agreements to receive a portion of the commission or the sales price after closing. You also may not have any expectation that you will be able to buy or rent your property back after the closing.

Once the listing agreement is complete, you must forward your Las Vegas short sale agent will send your lender a copy signed by all parties.

1. Upkeep of Property. Keep your property in good condition and repair and cooperate with your broker to show it to potential buyers. If your property is occupied by a Tenant, the Tenant must also satisfy this requirement. You are responsible for all property maintenance and expenses during the listing period including utilities, assessments, association dues and costs for interior and exterior upkeep required to show the property to its best advantage. Additionally, until ownership is transferred, you must report any and all property damage to your Las Vegas short sale agent and file a hazard insurance claim for covered damage. Unless insurance proceeds are used to pay for repairs or personal property losses as provided in the mortgage documents, your lender may require that they be applied to reduce the mortgage debt.

2. While you are selling your property, you still legally owe the full amount of your current monthly mortgage payment.

3. Clear Title. You must be able to provide the buyer of your property with clear title. To start, your Las Vegas short sale agent can order a title report to determine if you have other loans, judgments or liens secured by your property, such as a home-equity line of credit or a second mortgage. If there are such liens, they must be disclosed to your lender. You will need to either pay these loans off in full or negotiate with the lien holders to release them before the closing date. Under the HAFA 2013 guidelines, you must make sure other lien holders will agree not to pursue other legal action related to the pay off of their lien, such as a deficiency judgment. You may engage the help of your Las Vegas short sale agent to negotiate with the other lien holders. Note that your lender may allow certain amounts to be paid from sale proceeds to help get subordinate lien releases.

4. Consent to Discuss Your Records. Your lender will need to talk to you Las Vegas short sale agent and others involved in the sale. To authorize your lender to communicate and share your personal financial information about your mortgage, credit history, subordinate liens, and plans for relocation with your short sale agent (and other third parties that could be involved in the transaction) you will need to provide authorization to do so. The text below is a sample of the authorization letter you will need to sign. It is necessary for your lender to receive this consent in order to proceed with the short sale.

“I, _______, hereby authorize _______________ to communicate and share my personal financial information about my mortgage, credit history, subordinate liens, and plans for relocation with my broker and other third parties who may be involved in my proposed short sale and related transactions, including, but not limited to, employees of the United States Department of the Treasury and its financial agents.

5. Requirements for Sales Contract. The Sales Contract must contain the following clauses: “Seller and Buyer each represent that the sale is an “arm’s length” transaction and the Seller and Buyer are unrelated to each other by family, marriage or commercial enterprise.” “The Buyer agrees not to sell the property within 30 days of closing of this sale. The Buyer agrees further not to sell the property within 90 calendar days of this sale for a price greater than 120 percent of the short sale price.”

6. Send in Accepted Offer. Within 3 days after you accept an offer on your property, your Las Vegas short sale agent will need to send your lender a copy of the fully-executed sales contract plus all addenda.

HAFA 2013 Short Sale Program Guidelines
—Lender Responsibilities

1. Full Satisfaction of Mortgage. Provided the property sells at the lender’s approved list price or you realize the acceptable proceeds (all the funds that remain after the approved sales costs have been paid) from the sale, and provided you meet all the other terms of the Short Sale Program, the lender will prepare and send to the settlement agent for recording a lien release in full satisfaction of the mortgage, foregoing all rights to pursue a deficiency judgment.

2. Price Adjustments. If the property does not sell, the lender has the option of adjusting the list price or other offer terms.

3. Postponement of Foreclosure Sale. The lender will postpone any foreclosure sale until the expiration of the 120 day marketing period plus any extensions that they may grant in writing, or until the closing date of an approved short sale, whichever is later. Please note that the lender may still initiate foreclosure or continue with existing foreclosure proceedings as permitted by the mortgage documents during this period.

4. Subordinate Lien Releases. The lender has the option of allowing a total of the lesser of $8,500 or (maximum amount allowable by investor) to be paid from the sale proceeds to help get subordinate mortgage lien releases. As described above, if you have these types of liens or loans on your property, please gather any paperwork you have (such as your last statement) and send it to your short sale agent promptly. Remember, clearing these other liens and delivering clear and marketable title is your responsibility. The lender requires each subordinate lien holder to release you from personal liability for the loans in order for the sale to qualify for this program, but they do not take any responsibility for ensuring that the lien holders do not seek to enforce personal liability against you. Therefore, your lender will recommend that you take steps to satisfy yourself that the subordinate lien holders release you from personal liability.

5. Tax Reporting. Your lender will report the difference between the remaining amount of principal you owe and the amount that we receive from the sale to the Internal Revenue Service (IRS) on Form 1099C, as debt forgiveness. In some cases, debt forgiveness could be taxed as income. The amount, if any, the lender pays you or your Tenant for moving expenses may also be reported as income. We suggest that you contact the IRS or your tax preparer to determine if you may have any tax liability.

6. Credit Reporting. Your lender will follow standard industry practice and report to the major credit reporting agencies that your mortgage was settled for less than the full payment. They (and we) have no control over, or responsibility for, the impact of this report on your credit score. To learn more about the potential impact of a short sale on your credit you may want to go to http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre24.shtm.

7. Termination of our Responsibilities. Your lender may also terminate our responsibilities described in this letter at any time if:
a. You fail to authorize us to discuss your personal financial information with your broker or others involved in the sale;
b. Your financial situation improves significantly, you qualify for loan modification, you bring the account current or you pay off the mortgage in full;
c. A significant change occurs to the property’s condition or value;
d. There is evidence of fraud or misrepresentation;
e. You file for bankruptcy and the Bankruptcy Court declines to approve the sale transaction;
f. Litigation is initiated or threatened that could affect title to the property or interfere with a valid conveyance;
g. You or your Tenant, if applicable, fail to cooperate with the listing broker or make the property available for marketing; or
h. You do not sign and return the attached Hardship Affidavit form at closing.

8. Approval of Sale. Within 10 business days of your lender’s receipt of an executed purchase contract and all addenda, they are to approve the sale if it is within the requirements of the HAFA 2013 Short Sale Program Guidelines and any other liens are released.

9. Closing. The closing must occur within a specified number of calendar days of the Sales Contract execution date.

Other Important Information

1. Allowable Costs that May be Deducted from Gross Sale Proceeds. In addition to the costs of settling subordinate liens and expenses for relocation assistance, described above, your lender will allow the following items to be deducted from gross sale proceeds of your property:

a. Closing Costs. The closing costs paid on your behalf as seller must be reasonable and customary for the market.

b. Real Estate Commissions. Your lender will allow to be paid from sale proceeds, a real estate commission of 6% percent of the contract sales price.

2. Relocation Assistance. If you or a Tenant occupy the property as a principal residence and you wish to receive (or have your Tenant receive) relocation assistance, you must inform the lender in writing of your request. You will be required to certify under penalty of perjury at closing that the property is occupied as a principal residence by (i) yourself; (ii) a Tenant; or (iii) your legal dependent, parent or grandparent who is living in the property rent-free.

To receive relocation assistance, the occupant must be required to vacate as a condition of the sale. In addition, you must provide (i) evidence that the property is your/their principal residence, which in the case of a Tenant may include information concerning the Tenant, a copy of the lease agreement or other evidence of occupancy; and (ii) a certification signed by each occupant that will receive relocation assistance attesting to the occupant’s compliance with Section 1481 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203) (the Dodd-Frank Certification). Your Las Vegas short sale agent will provide you with a Dodd-Frank Certification form(s). If you fail to deliver the Dodd-Frank Certification prior to the closing of the sale of the property, the relocation assistance will not be paid. Upon your compliance with the requirements of the HAFA 2013 Short Sale Program Guidelines, your lender will instruct the settlement agent to pay the occupant from the sale proceeds at the same time that all other payments, including the payoff of our first mortgage, are disbursed by the settlement agent. Only one payment per household is provided for the relocation assistance, regardless of the number of occupants.

3. Short Sale Affidavit. At closing the buyer and seller will be required to execute an affidavit certifying that the sale is an “arm’s length” transaction and the seller and buyer are unrelated to each other by family, marriage or commercial enterprise. The affidavit will also include an agreement by the buyer not to sell the property within 30 days of closing of the sale, or between 31 and 90 calendar days of the sale for a price greater than 120 percent of the gross sales price and an affidavit of occupancy.

4. Settlement of a Debt. You should understand that this proposed transaction represents your lender’s attempt to reach a settlement of the delinquent mortgage. There is no guarantee that the transaction will be successful. In the event this transaction is unsuccessful, your lender may exercise all remedies under the mortgage, including foreclosure.

We hope you decide to take advantage of this short sale option.