Came across this article from CNBC last week discussing the impact HAFA has had (read: not what was expected!)
The treasure department says the following
“While HAFA has been widely credited with streamlining the short sale process by setting clear timelines, documentation requirements and procedures, feedback from various stakeholders including servicers, housing counselors, realtors and others supported that additional enhancements could be made to further streamline short sale transactions, to the benefit of homeowners.”
As a result, HAFA rule changes include the following:
A recent report from the folks who oversee the TARP (the Congressional Oversight Panel) said that the Treasury has spent just $4.3 million on HAFA for 661 short sales. So Treasury, last week, decided to change the rules a bit:
- HAFA no longer requires that servicers verify the borrowers finances
- HAFA no longer requires servicers to determine if the borrowers monthly payment is higher than a 31 percent debt-to-income ratio.
- HAFA no longer requires second-lien holders to agree to accept 6 percent of the unpaid principal balance owed them, up to $6,000. Servicers now decide who gets paid how much, with a cap still at $6000.
- HAFA now requires borrowers seeking a short sale get an answer/agreement within 30 days.
We have criticized HAFA since its inception and are not surprised at all to see it faltering. That said, the guidelines mentioned above look like they provide marginal improvements, but not enough to drastically change anything. In particular, one we wrote about in an earlier blog post:
Removing the case-by-case analysis that short sales need: Every short sale transaction is different, and lender should approach them as such. HAFA requires lenders to identify their minimum net proceeds ahead of time, and the guideline requires 120 day period to change that value. This means that if a property falls outside of the minimum net proceeds, it isn’t eligible under HAFA. That’s a shame; because the house is worth what the house is worth, and even in the span of 120 days the criteria used can change. It removes flexibility from the process, which is critical when handling these transactions.
This was not adjusted and really makes it difficult for lenders to truly handle transactions on a case by case basis.
What are your thoughts on the market forecast and the HAFA program?