How Are Home Buying, Home Selling, Short Sales And HAFA Related?
That was a mouthful – but to clarify, they are all aspect of real estate and part of a new government program. As of Monday this week (April 5) the Federal Government’s HAFA program came into effect. It’s another attempt to relieve home owners of the threat of foreclosure and to allow them a reasonable out from their mortgage commitments.
At present, there are home owners that are financially distressed and paying anywhere up to 50-60% of their income in mortgage payments. In most cases, these payments start to fall into arrears and eventually the lender acts by foreclosing on the loan. One escape for borrowers has been to ‘short sell’ their home. This is the practice of selling your home for less than the balance of the mortgage.
For lenders, this is slightly more preferable to foreclosing. When foreclosing, the lender has to pay legal costs then hope to sell the property quickly to recover the outstanding mortgage. Most lenders lose money on foreclosing. Short selling can be an option to reduce these losses. The problem is, lenders are notoriously slow at communication during a short sale process. If you think short means quick – forget it, it’s generally slow and painful.
When it comes to home buyers and sellers, their frustration has been the delay in negotiating and closing on a short sale. If a lender takes months to respond to an offer, the proposed buyer has normally moved on to another property (and probably already closed the purchase). Enter the Federal Government and the HAFA program.
Under the HAFA program, borrowers can approach their lender to negotiate a short sale. If agreeable, the home is listed as a short sale. Home buyers can then make an offer which the lender has to respond to within ten days now – not when they feel like it, as in the past.
HAFA is designed to streamline short sales so that lenders, borrowers and buyers can complete the process smoothly. For borrowers, the upside of a short sale is that the impact on their credit score is much less than that applied due to foreclosure. They are also able to move on from that crippling mortgage without a lot of painful scars.
For more information on HAFA, contact your lender. As with all government programs, it will not suit everyone whose mortgage is in distress – however, if you don’t inquire, you will never know.
Related posts:
