According to market research firm CoreLogic, nearly 11 million of properties nationwide had negative equity at the end of the second quarter of 2011. Another 2.4 million homeowners had less than 5% equity. As of November 2011, 30.2% of homes in California are underwater, or 2,064,850; 4.6% (313,021 homes) are near underwater. California’s foreclosures in November 2011 (63,689) is 28.38% of our nationwide foreclosures of 224,394.
This is an untenable situation and lenders recognize that a short sale saves them money and they prefer to do short sales rather than foreclose on properties, and if the borrowers cooperate with the short sale process rather than go into foreclosure, it is easier for them to get another mortgage in the future. Fannie Mae‘s new policy is that borrowers who participated in the short sale can buy a new home within two years rather than 5 or 7 years for Foreclosure, Bankruptcy or Deed in Lieu of Foreclosure.
FHA‘s new policy as of April 5, 2010 says that if you are not behind in your payments when you do the short sale, you could qualify for another mortgage immediately after the short sale as long as the new property is of lesser quality and value than the short sale property and you qualify financially for the payments.
The Home Affordable Foreclosure Alternative (HAFA) program was established to help homeowners get mortgage relief. It was started on November 30, 2009 and will expire on December 31, 2012. HAFA establishes standard guidelines for short sale and deed in lieu of foreclosure. HAFA was revised on March 26, 2010, and effectively on April 5, 2010, (1) allows the borrower to receive pre-approval short sale terms even before listing the property; (2) requires that borrowers be fully released from future liabilities for debts (no deficiency liability); (3) provides financial incentives for homeowners ($3,000 of relocation expenses); (4) provides financial incentives for lenders; (5) shortens the time for approval to 10 days; and (6) stop foreclosure proceedings.
To qualify for HAFA, (1) the property must be borrower’s principal residence; (2) the mortgage liens must have originated before January 1, 2009; (3) loan amount is lower than $729,750; (4) the mortgage is delinquent or default is reasonably foreseeable; (5) home- owner was found not eligible for the Home Affordable Modification Program (HAMP) or homeowner declined participation in HAMP.
If you had applied for HAMP and were not approved, you will receive a letter inviting you to participate in HAFA. You may decide not to participate in HAMP and request the HAFA Application yourself, or you can talk to me! Real estate professionals had played and will continue to play an important role in these difficult times.