Great news for distressed Yuba City home owners! The US Government recently announced a new program to assist home owners sell their homes and avoid foreclosure, even if the sales price is not enough to pay off their existing mortgage loans. The new program is called HAFA (Home Affordable Foreclosure Alternative) which started on April 5, 2010 and will end on December 31, 2012.
To qualify for HAFA, you must meet the following requirements:
- Property must be borrower’s principal residence.
- Loan must be a first trust deed originated before December 31, 2008
- Loan must be delinquent or default must be reasonably eminent.
- Borrower must be eligible for, but unable to complete, a loan modification under the Home Affordable Modification Program (HAMP)Benefits of the HAFA short sale include:
- $3,000 to borrower for relocation expenses.
- No deficiency judgment against home owner.
- New funds are not required by home owner to close escrow.
- Seller’s credit rating is not affected, negative rating is not allowed.
- Conventional financing for a new home available within 24 months after successful HAFA transaction with good payment history
The first step for the distressed Yuba City home owner is to contact their lender and establish communication. Avoiding contact with the lender is a big mistake! The home owner must make clear to the lender exactly why continuation of the regularly scheduled mortgage payments will no longer be possible. Then, apply for a Loan Modification Plan. If the home owner is approved for a Loan Modification then a HAFA short sale will not be allowed.
If a loan modification is denied, then the Yuba City home owner can apply for a HAFA short sale agreement. Once the HAFA short sale is approved, things can move very quickly. For example, once an offer is submitted to purchase a HAFA short sale, the lender must respond within 10 days.
The new HAFA program is welcome relief to distressed Yuba City home owners and realtors alike. Real estate transactions can be streamlined and close escrow quickly and smoothly. If you are considering a short sale of your property please contact me for more information.
Update: October 7, 2010
The HAFA program applies to the Original first trust that was originated with the home purchase. Any refinanced loans do not qualify for the HAFA program.
In California, a bill to extend relief to refinanced loans SB 1178 (Corbett) was vetoed by Governor Schwarzenegger on September 30, 2010. The bill was intended to extend anti-deficiency protection to consumers who have re-financed their original mortgages and are now facing foreclosure. The Governor made clear that SB 1178 would interfere with an existing contract.