Surprise, Surprise – Government Short Sale Programs Continue to Flop

Anyone who’s followed the Art of Short Sales for any period of time knows that we have not been a huge fan of the HAFA, HAMP, and other government programs designed to ease the short sale process.

This week’s CNN article by Diana Olick continues to prove that over a year after its inception, the program continues to draw poor numbers.

HAFA provides financial incentives for servicers and borrowers to do short sales (selling the property for less than the value of the mortgage) and deeds in lieu of foreclosure (basically just giving the property back to the bank). The program launched in April of 2010 and was later streamlined in December, 2010, based on feedback from mortgage servicers, real estate agents and homeowners.

So far, HAFA has completed 7,113 short sales or DIL’s. In April, however, HAFA saw 1,666 completed, up 74 percent from the 959 done in March.

The government is touting this is a huge success – “a 74% growth!” – but as Diana points out, a 74% growth of nothing is still pretty close to nothing.

According to the article, JP Morgan Chase alone does close to 5,000 short sales a month -and that’s just one bank. The expectation is that the top few banks are likely doing in excess of over 20,000 short sales a month – in that light, HAFA is still producing inconsequential results.

Similarily to what we’ve said here, HAFA’s targeted audience limits the exposure it could potentially have.

“HAFA is a taxpayer funded program, so it has eligibility requirements targeted at a certain segment of the population,” says Risotto, noting that the program is for owner occupants who can demonstrate financial hardship and whose first mortgage is less than $729,750. “HAFA is not meant to be for every person looking to do a short sale,” she adds.

That knocks out investors, jumbo loans and borrowers who don’t meet the “hardship” requirements of the Treasury. The big banks are likely more lenient on that last one, again knowing that a short sales will be cheaper in the end than a foreclosure.

What are your thoughts? Had any success with HAFA? Post in the comments and let us know about it!

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8 Comments Posted in Market News
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  • http://www.zadling.com/ Zadling

    The reason short sale programs are such a flop is that banks don’t want to approve them so they can continue to collect servicing fees and other fees for things like property inspections and title searches.

  • Mikelewisproperty

    Nice information about the concept and its importance that HAFA
    provides financial incentives for servicers and borrowers to do short sales
    (selling the property for less than the value of the mortgage) and deeds in
    lieu of foreclosure (basically just giving the property back to the bank). The
    program launched in April of 2010 and was later streamlined in December, 2010,
    based on feedback from mortgage servicers, real estate agents and homeowners. Really
    you have done a good job. Thanks for Sharing.
     

    home sell by owner

  • Kallencooper

    Very interesting and informative blog I found
    here. HAFA simplifies and streamlines the short sale and DIL process by
    providing a standard process flow, minimum performance timeframes and standard
    documentation. It also allows borrowers to receive pre-approved short sales
    terms before listing the property.
    buyers advocates melbourne

  • Mike Lewis

    The written style is very prompt and the highly practical
    manners. Foreclosures continue to represent a substantial percentage of all U.S.
    residential sales and continue to sell at an average sales price that is
    significantly below the average sales price of properties not in foreclosure
    the result of a bloated supply of foreclosures and weak demand from homebuyers.
    Really you have done a good job.
    sale my house

     
     

  • Kevin Vitali

    It amazes me that all these guidelines are put in place and timelines to be met.  In my experience the HAFA program has been an impediment to a speedy approval its seems to take almost twice as long. about Massachusetts Short Sales

  • http://amzn.to/VIKABCBLOGCOMMENTS Daniel Milstein

    Trust me HAFA, HAMP are the two good antiforeclosure programs that government has implemented off-late and if you are facing or considering foreclosure, you are not alone. It seems that lowering the monthly payment by reducing the interest rate does not work for jobless and underwater borrowers.

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  • Jim

    I’ve found that these programs do slow down the process. The discussion as to whether these programs actually help is a very interesting one.  Many people seeking 
    short sale assistance often ask the same questions.