New financing and short sale guidelines effective today

J0441459FHA Upfront MIP  increases from 1.75% to 2.25%

Effective today for all new FHA mortgage files, the upfront mortgage insurance premium increases by one-half percent, from 1.75% to 2.25%. This translates to an additional $1,000 on a $200,000 loan. Files already in process are not affected, so if your mortgage file has already been submitted your MIP will not increase even if you haven't closed yet.

New HAFA Short Sale Guidelines intended to speed up the short sale process effective April 5, 2010

J0442457Whether or not you have been personally involved in a short sale you have likely heard that the time frame is usually anything but short. More than a year ago the National Association of Realtors urged the US Treasury Department, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac to improve the short sale process. The program going into effect today helps address those concerns.

Don't expect it to be a magic bullet. Changes will likely continue to evolve and not all potential short sales apply… but at least it is a start. Prior to this there have been no uniform guidelines, with both documents and processes very lender specific… making the short sale process very time consuming and difficult to navigate. Simply starting with standardization should be helpful in streamlining the process.

HAFA (Home Affordable Foreclosure Alternatives Program) is a complex program with nearly 50 pages of guidelines and forms. Here are just a few highlights to help understand the process…

Who is eligible for HAFA?

The borrower (the seller in a short sale) must meet the basic eligibility criteria for HAMP (Home Affordable Modification Program) below…

  • Principal residence
  • First lien originated before 2009
  • Mortgage delinquent or default is reasonably foreseeable
  • Unpaid principal balance for single unit no more than $729,750
  • Borrower's total monthly payment exceeds 31% of gross income

…then the loan itself must be evaluated to see if it is a candidate.

Although not all loan servicers participate in the program but about 90% do… click here for a list of those participating.

The goal of the program is to both standardize and speed up the short sale process. It allows sellers to enter into a short sale agreement with their loan servicer with pre-approved short-sale terms, including an acceptable price range, before listing the home for sale. Once an offer is made to purchase the home, the lender has 10 days to approve, reject or counter the offer.

While the 10-day time limit for responding to an offer is wonderful news for buyers, there is no time limit for the pre-approval process so sellers could see the wait shifted to the beginning of the process before a purchase agreement instead of after.

Here are highlights of the HAFA program:

  • Complements HAMPby providing a viable alternative for current homeowners who are HAMP eligible but still unable to keep their home
  • Uses borrower financial hardship information already collected under HAMP
  • Allows borrowers to receive pre-approved short sale terms before listing the property for sale
  • Requires sellers to be fully released from future liability for the mortgage debt
  • Uses a standard process, uniform documents, and timeframes/deadlines
  • Provides financial incentives:
    •  $3,000 for seller relocation assistance
    • $1,500 for servicers to cover admin/processing costs
    • Up to $2,000 match for up to three junior lien holders
  • Requires all servicers participating in HAMP to implement HAFA
  • The program sunsets December 31, 2012

Click here for more information.

Sharlene Hensrud, RE/MAX Results – EmailHomesMSP.com

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I love what I do! Highly insightful, analytical and creative, there is nothing I love more than helping you find the right solution for your real estate transition. My mission is to serve my clients with honesty and integrity, exceeding their expectations in service and support… and to help others by donating a portion of every transaction to Habitat for Humanity.
3 Responses
  1. The increment have pay an extra burden to loan holder. There are lots of people that did not happy by this. But i welcoming the policy because it made the loan process difficult & thus it put an restriction on marginal buyers.

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