Improvements to Short Sale Program Coming

April 18, 2011 (Brian Michael)

The Treasury Department has announced updates to the policy guidelines for the Home Affordable Foreclosure Alternatives (HAFA) program which has been followed by legislation introduced in Congress by U.S. Reps. Tom Rooney (R-Fla.) and Robert Andrews (D-N.J.) to improve the process for approving short sales in the HAFA program.

The new guidelines being implemented by the Treasury Department requires mortgage servicers to send a written confirmation to a borrower acknowledging their request for a short sale or a deed-in-lieu whether the request was initiated by the borrower or the mortgage servicer.

The mortgage servicer then has 10 business days following receipt of the request to include a description of the mortgage servicers evaluation process and a timeline for their decision on whether their request is acceptable or not.

The second part of the guideline is that the mortgage servicer must provide the borrower with a written approval, denial or alternative offer within 45 calendar days of receiving a completed request form and any other required paperwork, and if unable to do so, must provide the borrower with a written notice before the 45th day and updates every 15 days until a decision is made.

Additionally, the Treasury Department will now give mortgage servicers the ability to approve short sales to non-profit organizations for the purpose of renting and reselling the property back to the borrower, previously not allowed under the HAFA program.

Meanwhile, in the House of Representatives, Reps. Tom Rooney (R-Fla.) and Robert Andrews (D-N.J.) introduced the bipartisan “Prompt Decision for Qualification for Short Sale Act of 2011,” which similarly calls for a 45 day deadline for lenders to respond to short sale requests.

The legislation is strongly supported by the National Association of Realtors (NAR).

“The current short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a home owner from foreclosure,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I.

According to NAR’s data, about 13 percent of recent home sales nationwide have been short sales. The latest Treasury Department data through the end of February shows 4,488 homeowners had completed a short sale or deed-in-lieu through HAFA while another 10,177 homeowners have agreements in place with their mortgage servicers to participate in the HAFA program.

The new HAFA guidelines announced by the Treasury Department take effect on June 1, 2001, but mortgage servicers are being encouraged to follow the guidelines now.

Tags: Treasury Department, HAGA, guidelines, NAR, mortgage servicers, short sales, deed-in-lieu

Sources:
National Association of Realtors
DSNews.com
houstonrealestateoberserver (image)