Thursday, January 20, 2011

New Rules In Home Affordable Foreclosure Alternatives May Offer More Short Sale Opportunities

As more and more new legislation is passed in the banking industry, more and more banks are coming up with systems and programs to usher the short sales through faster and more efficiently.

Here is yet another article explaining as much.

By Lee McFarland

Changes in the Home Affordable Foreclosure Alternatives program may offer more homeowners the opportunity to short sell their home when they are in a situation where financial hardship and distress are present and, as a result, these individuals have been unable to qualify for a foreclosure prevention program and risk the loss of their home as a result. The Treasury Department reportedly has eliminated certain rules which are felt to have held short sales back since the program’s inception in 2010.

An article on stated that, “…the Treasury has eliminated rules that have constricted eligibility for HAFA. Among them, servicers are no longer required to verify a borrower’s financial information or determine if the borrower’s total monthly mortgage payment exceeds a 31% debt-to-income ratio.” Obviously, homeowners who have been dealing with negative equity in their home have had a great deal of trials when it comes to finding a solution for their home loan predicament when they were unable to qualify for such programs as the Making Home Affordable modification plan or extension programs like the Unemployment Program.

While there have been servicers who were cautious about granting short sales, as some homeowners had falsely claimed hardship simply so that they could escape their underwater mortgage without having to default, there are those who may have suffered as a result of these strict rules which prevented short sales without homeowners meeting HAFA qualifications.

Obviously, when it comes to providing a home loan modification, homeowners must still meet similar requirements that are being eliminated in short sales, due to the fact that homeowners who are planning to leave their home to enter into an alternate living arrangement do not necessarily need to meet debt-to-income ratios or provide certain financial information. The assumption is that homeowners who have not qualified for a home loan modification program, after submitting information on these areas of their finances, should not be beholden to these qualifications if they are deemed ineligible for a modification and are attempting to short sell their home.

Understandably, foreclosure alternatives have been helpful for some homeowners who have suddenly come upon a position where financial distress has removed the ability to pay their mortgage or even qualify for these assistants plans, but through programs like short sales and deed in lieu of foreclosure alternatives, homeowners may be able to get themselves on a more stable ground and reenter the housing market sooner rather than later. Also, there are homeowners who have participated in short sale programs who have been granted relocation assistance, which obviously, has aided with moving costs or fees related to expenses like a security deposit.

While these new changes may not qualify all homeowners for a short sale, it’s hoped that by lifting some of these restrictions and qualifications, more homeowners in a distressed property situation will be able to take advantage of foreclosure alternatives like short sales and avoid facing a formal foreclosure and doing damage to their credit score.

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