Below is a summary of an interesting article by Kerry Curry regarding recent changes to the short sale process:
Due to recent changes in the Obama administration's Home Affordable Forclosure Alternative program or HAFA, AMS Servicing is projecting a 50% increase in short sales this year. According to their metrics, 91% of previously ineligable borrowers might be eligable under the proposed changes to HAFA.
The key to making short sales successful is becoming more proactive regarding forclosure alternatives. In the past, most servicers would take a more reactive approach to short sales, reviewing each case as they were brought to them. However, with recent changes to the HAFA program, servicers are actively pursuing short sale opportunities.
"We need to get these short sales done in a timely fashion. A short sale today is a lot better than it was six months ago," said Abel Fregoso, vice president and national field short sale manager for Wells Fargo
Under the new HAFA guidelines, if the borrower is less than 60 days overdue on their mortage payment, they will no longer be required to verify their income. This opens the door for applicants whose income was previously too high to qualify for a short sale.
David Sunlin, senior vice president at Bank of America, said, "It’s important for servicers to guide the borrower through to the end, whether it’s a short sale or a deed in lieu. Changes to the program are seen as positive by servicers. It works best, he said, when used pro-actively, by helping the borrower market the property instead of having the borrower come to the servicer with a buyer in hand.
Launched in April of 2010, the HAFA program was created so that servicers and investors could pursue short sales and deeds-in-lieu of foreclosure for homeowners that weren't eligible for the Treasury's Home Affordable Modification Program, or HAMP. Short sales can be quite challenging, and with the foreclosure process sometimes taking up to two years to complete, the ability to remain in your home without paying the mortage lessens the incentives to participate in the program. The recent modifications to HAFA guidelines are designed to increase this participation.
Beverly Wilbourn, vice president of preferred loss mitigation strategies for Fannie Mae, offered this advice, "The key is to engage the borrower earlier and keep them engaged in order to avoid a foreclosure. Offer them a way to transition from a very difficult financial circumstance," she said. "Get to the homeowner and talk them through to life after this horrific situation."
John Will, director of component servicing with Fannie Mae, said the GSE is looking at ways that it can do a better job at short sales. "The goal is to speed the process. It is taking all the best practices it can find to further cut the time it takes to get a short sale done. We are trying to cut the timeline in half. The goal is to get to the first offer faster and provide a response because it it goes to a second or third offer, those are generally for less money."
