Fort Lauderdale

If you need to sell your home for less than the mortgage, new rules governing short sales are designed to make the process faster and easier.
The rules are part of the Treasury’s Home Affordable Foreclosure Alternatives — HAFA — program and are aimed at speeding up lenders’ decisions on short sales and making life easier for sellers.
“It streamlines and shortens the short-sale process,” says Kurt Gleeson, national vice president of sales for Charlotte, N.C.-based RealEstate.com. “Prior to HAFA, the time period for short sales varied greatly among lenders, and it was a very uncertain process.”
A short sale, also called a pre-foreclosure sale, occurs when homeowners can’t afford their home mortgage payments and the house is worth less than they owe on it. The lender accepts the proceeds from the sale, even though the price doesn’t cover the entire debt.
The knock on short sales is they take too long. A short sale can be done only with the lender’s permission, and the lender sometimes takes months to decide whether to accept the buyer’s offer. Even when the delayed answer is “yes,” the buyer often has given up and bought another house.
Under HAFA, the lender decides upfront the minimum price it will accept. Then, the lender and homeowner have tight deadlines to meet. Finally, the seller gets $3,000 in moving expenses for leaving the house in decent shape.
What borrowers need to know
HAFA is an alternative to the more desirable HAMP — the Home Affordable Modification Program. Both programs are intended to keep borrowers in their homes and out of foreclosure.
Homeowners are evaluated for a HAFA short sale if they are eligible for HAMP and the following two criteria apply to the borrower:
• Flunks outs of a HAMP modification by missing payments; OR isn’t offered a trial modification; OR rejects a loan modification offer.
• Lender doesn’t have a non-HAMP loan modification for the homeowner.
Borrowers who qualify for HAFA and request a short sale receive a seven-page document called a “short sale agreement” from their lenders. A borrower has two weeks to respond. After responding, the borrower has four months to sell the house.
At that point, the borrower and the lender operate on parallel tracks:
• The borrower hires a real estate agent. Meanwhile, the lender hires someone to assess the property’s value.
• The borrower continues to make mortgage payments, but the payments are reduced to a maximum of 31 percent of monthly income. The lender keeps track of the shortfall between what is owed and what’s being paid.
• While the borrower waits for prospective buyers to make offers, the lender decides the “minimum acceptable net proceeds.”
“Minimum acceptable net proceeds” is a term that represents the smallest amount of money a loan’s owner will accept. This sum is affected by:
• How much the borrower owes on the first mortgage.
• How much is owed on the second mortgage.
• The unpaid interest racked up.
• Expenses such as closing costs.
• The real estate agent’s commission.
The lender might or might not tell the borrower the bottom-line amount.
“HAFA requires (the lender) to establish the net. You don’t have to speak it,” says Jim Satterwhite, chief operating officer for the parent company of National Quick Sale, a Jacksonville, Fla.-based technology provider for mortgage servicers that deal with delinquent loans.
Decision required within 10 days
If a buyer comes through before the four-month deadline, the seller and the buyer send the lender a document called a “request for approval of short sale,” or RASS.
The lender is required to give a yes-or-no response within 10 days of receiving the RASS and a thick pile of accompanying paperwork. The answer must be “yes” if the deal meets the minimum acceptable net proceeds.
After the buyer closes, the seller is entitled to a “relocation incentive” of $3,000.
“That doesn’t pay for much of a move, obviously, but depending upon the price point, having that borrower assistance with relocation expense is a very creative and it’s a very useful tool,” says Richard Powers, senior vice president of real estate services for Altisource Portfolio Solutions, a company in Kennesaw, Ga., that manages foreclosures.
For many borrowers involved in HAFA short sales, the process won’t be so straightforward. A lot of troubled homeowners have home equity loans or home equity lines of credit. Lenders attached to home equity loans and HELOCs have the power to block a short sale if they get stiffed. Under HAFA, equity lenders get some proceeds of the sale, but they don’t get much.
Mortgage insurers have the ability to stop short sales, too. Some mortgage insurers won’t approve a short sale unless the borrower gives them a few thousand dollars. They’re not allowed to hit up borrowers for money in a HAFA short sale. As a result, they’re sometimes reluctant to approve sales under the HAFA rules. They have the option of saying no.

Sales of existing single-family homes rose in South Florida and statewide in March, but in most cases prices have yet to follow as foreclosures and short sales continue to impact the housing market, according to Florida Realtors.

West Palm Beach was the exception in the tri-county area. It saw the biggest boost, with existing home sales up 23 percent, to 843 homes from 685 a year earlier. The median price rose 8 percent, to $246,100 from $228,100.

Fort Lauderdale home sales rose 8 percent, to 734 up from 680. However, the median price fell 3 percent, to $214,000 from $219,500.

In Miami, existing home sales rose 17 percent, to 649 from 556. The median price slid 4 percent, to $197,500 from $205,600.

Florida Realtors said existing condo sales rose in all three counties, as well, with the biggest gain in Miami. Sales there were up 58 percent, to 835 from 529. The median price of an existing condo in Miami fell 8 percent, to $138,800 from $151,000.

Existing condo sales in Fort Lauderdale rose 46 percent, to 1,140 from 781, but the median price fell 10 percent, to $73,600 from $82,100.

West Palm Beach existing condo sales were up 45 percent, to 999 from 691. But, the median sales price fell 9 percent, to $90,900 from $99,800.

Statewide, existing home sales rose 24 percent, to 16,294 from 13,090 homes sold in March 2009. The median price statewide was down 3 percent, to $137,000 from $141,300 in the same year-ago period.

Florida Realtors also reported statewide sales of existing condos rose 63 percent in March, to 7,148 from 4,387 in March 2009. Statewide, the median price of a condo fell 11 percent, to $96,900 from $108,500.

Nationwide, existing home sales jumped 6.8 percent to 5.35 million in March, as homebuyers rushed to get the tax credit that expires at the end of the month, according to the National Association of Realtors.

NAR’s latest outlook anticipates a rise in home sales in late spring, which should help to absorb inventory. Increased pending sales is a positive sign for home prices, which are continuing to stabilize, according to NAR Chief Economist Lawrence Yun.

South Florida saw one out of every 46 homes fall into foreclosure in the first quarter of the year, according to RealtyTrac.

The Irvine, Calif.-based marketplace for foreclosure properties ranked the Miami-Fort Lauderdale-Pompano Beach metropolitan statistical area 11th in the nation for properties with foreclosure filings.

Only two other Florida MSAs – Cape Coral-Fort Myers (third) and Orlando (10th) – had more.

In the first quarter, the South Florida MSA had 52,224 homes in foreclosure. That was up 10.36 percent from the fourth quarter of last year and up 71.3 percent from a year earlier.

The Las Vegas MSA continued to post the nation’s highest foreclosure rate, with one in every 28 homes falling into default. That’s 4.9 times the national average.

Nationwide, there were 932,234 properties with foreclosure filings in the first quarter, or one in every 138 homes. That was up 7.23 percent from the previous quarter and up 16 percent from a year ago.

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