On Nov. 30, the U.S. Treasury Department unveiled details about a new program that will create standardized forms for short sales and provide incentives to lenders to approve short sales. This new program, the Home Affordable Foreclosure Alternatives Program (HAFA), applies to all loans not owned or guaranteed by Fannie Mae or Freddie Mac, who will issue their own policies in the coming weeks.
Among other things, this program will seek to encourage lenders to simplify and streamline the short sale approval process through the following guidelines: (1) Prohibits lenders from requiring a reduction in the commissions negotiated with a real estate broker in the listing agreement (up to 6 percent); (2) Allowing borrowers to receive pre-approved short sales before the property is listed for sale (including minimum acceptable net proceeds from the sale; (3) Requires lenders to release the borrowers from all future liability for the first mortgage debt (no cash contribution, promissory note or deficiency judgment is allowed; (4) Requires lenders to use standard processes, documents and deadlines for approval; and (5) provides direct financial incentives to encourage lenders to approve short sales.
This program does not take effect until April 5, 2010, but lenders may implement the new program before that date if they meet certain requirements. The program will end on December 31, 2012. For more information, click here.