A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.
Supplemental Directive 09-09 (November 30, 2009) gives servicers (those who process payments) guidance for carrying out the program. All servicers participating in HAMP must also implement HAFA in accordance with their own written policy, consistent with investor (lender) guidelines. The policy may include such factors as the severity of the loss involved, local market conditions, the timing of pending foreclosure actions, and borrower motivation and cooperation.
A short sale agreement (SSA) will be sent by the servicer to the borrower after determining the borrower is interested in a short sale and the property qualifies. It informs the borrower how the program works and the conditions that apply. After the borrower contracts to sell the property, the borrower submits a “request for approval of short sale” (RASS) to the servicer within 3 business days for approval. If the borrower already has an executed sales contract and asks the servicer to approve it before an SSA is executed, the Alternative RASS is used instead. The Servicer must still consider the borrower for a loan modification.What are the steps for evaluating a loan to see if it is a candidate for HAFA?1. Borrower solicitation and response.
2. Assess expected recovery through foreclosure and disposition compared to a HAFA short sale or DIF.
3. Use of borrower financial information from HAMP. (May require updates or documentation.)
4. Property valuation.
5. Review of title.
6. Borrower notice if short sale or DIL not available (to borrowers that have expressed interest in HAFA).
Why was the number of short sales rising?
Due to the economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.
A short sale can also be the best option for a homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially.
What challenges have short sales presented for REALTORS®?
The rapid increase in the number of short sales, and the short sales process itself present a number of challenges for REALTORS®. Major challenges include:
Limited experience Many REALTORS® are new to the short sales process; a difficulty which is compounded by many lenders’ lack of sufficient and experienced staff to process short sales. Even if the REALTORS® are experienced, most servicers are under-staffed and still not adequately trained, making negotiating a short sale particularly difficult.
Absence of a uniform process and application Currently, both short-sales documents and processes are lender-specific, making it very difficult and time-consuming for REALTORS® to become knowledgeable and efficient in facilitating these transactions.
Multiple lenders When more than one lender is involved, the negotiations are much more difficult. Second lien holders often hold up the transaction to exert the largest possible payment, in exchange for releasing their lien, even though in foreclosure they will get nothing.
As a result of these challenges our members have reported difficulties with: unresponsive lenders; lost documents that require multiple submissions, inaccurate or unrealistic home value assessments, and long processing delays, which cause buyers to walk away.
What is being done to address or eliminate these challenges?
Well it goes without saying that we are in tough times economically as a country and Charleston South Carolina is no different, and even more so as it pertains to real estate. With all the bad news we hear about real estate and the economy there is some good news to report. Even though our government is has made many mistakes with our money recently it appears as if those in the white house are doing their best to help homeowners.There is a program to help those who can’t afford their homes any longer quickly sell their homes (that’s relative) without being forced into foreclosure. It’s called (HAFA) or Home Affordable Foreclosure Alternatives program.HAFA is designed to simplify and streamline the use of short sales and deeds-in-lieu of foreclosure by improving the process. Specifically, HAFA will:• Complement HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
• Use borrower financial and hardship information already collected in connection with consideration of a loan modification under HAMP.
• Allow borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
• Prohibit the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6%). This is to ensure the seller/borrower can still utilize the expertise of a real estate agent.
• Require borrowers to be fully released from future liability for the first mortgage debt and if the subordinate lien holder receives an incentive under HAFA, that debt as well (no cash contribution, promissory note, or deficiency judgment is allowed).
• Use standard processes, documents, and timeframes/deadlines.
• Provide financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 match for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis; up to 3% of the unpaid principal balance of each subordinate loan).HAFA is a complex program with 43 pages of guidelines and forms. To help everyone better understand the process, below are some frequently asked questions that address the basics.Initially announced on May 14, 2009, with guidance and standard forms issued on November 30, 2009, the program will help owners (referred to below as borrowers) who are unable to retain their home under the Home Affordable Modification Program (HAMP). A borrower (the current owner) may be able to avoid a foreclosure by completing a short sale or a deed-in-lieu of foreclosure (DIL) under HAFA. The guidance and forms released on November 30 do not apply to loans owned or guaranteed by Fannie Mae or Freddie Mac. Those enterprises will issue their own HAFA guidance and forms.
On May 14, 2009, the Obama Administration announced its upcoming Foreclosure Alternatives Program. Among other things, the new program:
Establishes financial incentives for servicers, sellers, and second lien holders to encourage the completion of short-sale transactions.
Requires that a timeline, of no fewer than 90 days, be set to allow a homeowner to sell a home, without threat of foreclosure action.
Requires the short sale agreement to specify reasonable and customary real estate commissions and costs to be deducted from the sales prices. (The servicer must agree not to negotiate a lower commission after receiving an offer.)
Will provide standardized documents, including short-sale agreements and offer acceptance letters.
The Foreclosure Alternatives Program is anticipated to launch in late July.
It’s virtually impossible to change your score in the time between when most people decide to buy a home or refinance their mortgage and when they apply. So the short answer is, you really can’t “on the spot.” But there are strategies you can live with to make sure when you apply for a loan your score is as high as possible.
Make sure that the information each of the three credit reporting bureaus has on you is consistent and up to date. Order a copy of your credit report about once a year, and dispute any inaccuracies.
Note: Theoretically, if a series of credit reports is requested on your behalf during a limited amount of time, your score goes down until time passes without any inquiries. Changes in the law though have made “consumer-originating” credit report requests not count so much. Also, a series of requests in relation to getting a mortgage or car loan is not treated the same as a number of credit card requests in a limited time. This is because the credit bureaus, and lenders, realize that people request their own credit reports to keep up with what’s on them, and smart consumers shop around for the best mortgage and car loans.
Unsolicited credit card solicitations in the mail don’t count against your credit report, so don’t worry.
The two main components of your credit score are your payment history and the amounts you owe. Bankruptcy filings and foreclosures, which can stay on your credit report for as long as 10 years, can significantly lower your score. It’s never a good idea to take on more credit than you can handle.
Late payments work against you. It’s extremely important to pay bills on time, even if it’s only the monthly payment.
Don’t “max out” your credit lines. Since the size of the balance on your open accounts is a factor, lower balances are better.
It’s said that by carefully managing your credit, it’s possible to add as much as 50 points per year to your score.
Well, even though the jobs report wasn’t as bad as expected that still doesn’t mean our country is out of the quagmire yet. Especially when it comes to housing. Some figures estimate 1 in every 400 homes is being foreclosed on, and there is expected to be as many as 10 million short sales over the next 5 years.What does this mean for you as a seller? Losing a buyer for something not related to a serious disagreement over price is careless. So here are the 10 things you need to be careful of when trying to sell your home.
Dirt -Hands down, our panel agrees: Nothing turns off a buyer quicker than a dirty house.
Odors – Buyers, it’s said, buy with their noses. Make sure your home smells fresh and inviting.
Old fixtures – Want buyers to roll their eyes? Leave old fixtures on your doors and cabinets. Faded, worn, broken, outdated, and ugly fixtures will surely turn away buyers. Sure you can replace them, but people want to move right into a house without having to do work.
Wallpaper – Your grandmother may have had it in every bedroom. Your mom may have loved it as a room accent. But today’s buyer wants no part of wallpaper.
Popcorn acoustic ceilings – Times change, and with them home decor styles. Acoustic popcorn ceilings, once the must-have for fashionable homes in the ’60s and ’70s, now badly date your space.
Too many personal items – Psychologically, when buyers tour a home, they’re trying it on to see how it fits, just as they would a skirt or a pair of pants. If your house is cluttered with too many personal items, it’s like the buyer is trying on those clothes with you still in them. A fit is unlikely.
Snoopy sellers – Its best not to be at the home when there is a showing. Buyers want to walk and anaylze at their own leisure without the sellers 2 cents every few minutes. Its perceived as a hard sell. If you must be there, only be there to answer questions about the home and nothing else. Pretend to be invisible.
Misrepresenting your home – Misrepresenting your house online in the Multiple Listing Service is a sure way to really upset buyers and their Realtors. If I show up with my buyers and the house is NOT what the sellers agent says it was on MLS I am going to be upset and so is the buyer for wasting our time and gas to go see it.
Poor curb appeal – Much is made of curb appeal, and for good reason: It’s your home’s handshake, the critical first impression that lasts with most buyers. This one is HUGE deal. People want to come home to a beautiful home when they drive up, and the first impression people get of you is your home from the outside.
Clutter – Whether inside or out, less is more when it comes to clutter.
Some of this information gathered from: Bankrate.com
I must admit living in Charleston, SC is very nice, but lets face it living in a coastal city can be very expensive as compared to living inland. There are inherent risks to living in a coastal town and the biggest one is the risk of a hurricane and who wants to lose their home? No one. When hurricane Katrina hit LA, State Farm lost $$ billons of collected premium over 58 years in just 8 short hours. Truth is insurance companies do not ever want to pay out from a catastrophe, but they have to and they know it. SO in order to compensate for an inevitable occurrence of a hurricane the only thing they can do is increase premiums, or have higher premiums to stuff their pockets in the event of a loss. A dollar and eleven cents ($1.11) is paid out in wind claims for every dollar ($1.00) collected in premium.Most companies that write in the eastern coast of the US have an allotted amount of policies they are allowed to write as determined by their powers that be. If they have exceeded that amount and/or feel they have more policies then is safe for their solvency; the only way they can reduce their exposure is to increase your premiums and hope you go elsewhere, or cancel you.Luckily South Carolina has been one of the smarter states by carefully devising a plan to ensure the coastal residents have sufficient hurricane coverage. The SC Dept of Insurance has worked tirelessly to devise a system for keeping adequate carriers interested in offering insurance in the state.There are two types of coastal insurance carriers. Those who include wind coverage and those who don’t, and the truth is that there are very few insurance companies that care to write insurance on the coast and include wind coverage. Wind coverage alone will make up 80%+ of your premium expense.If your home is in what’s called the “wind zone” then you will be required to specifically have wind coverage. Just because your home isn’t in the “zone” doesn’t mean you are not out of harms way when a hurricane comes. This just means that you won’t have to have a carrier that offers wind coverage specifically and your traditional hazard policy will coverage the damages, however usually with a higher deductible.If your home or business is in the wind zone then either you have to find a carrier that offers wind coverage OR you will have to get separate coverage from the SC Wind & Hail Underwriting Association. A non-state agency but a separate organization designed by the state comprised of insurance companies that write in SC that contribute a portion of their earnings to a “pool” of money used to cover the residents that reside in the coastal areas. The SC Wind Association is even further insured by many domestic, and international re-insurance companies in the event it goes insolvent and is unable to cover all filed claims.When buying a home you need to ask your real estate agent to see if the homes they are showing you are in one of the two wind zones, because it could dramatically increase your monthly expenses. Also, you should ask if the home is in a flood zone, because that too is an additional coverage separate from traditional hazard or home owner’s coverage.
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