On November 1, 2012 the Treasury released Supplemental Directive 12-07 updating the policies for the Home Affordable Foreclosure Alternative Program (HAFA) with a directive that all Servicers must implement the changes by February 1, 2013 (unless prohibited by the investor - but that's a whole other story). Many folks handling short sales, apparently, were not aware of the upcoming changes until December 17, 2012 when the Treasury's Director of Policy and Homeownership Preservation, Laurie Maggiano, appeared on a major short sale webinar.
On December 18, 2012, Bank of America released a notice indicating that the Fannie Mae and Freddie Mac HAFA Short Sale program WAS EXPIRING as of December 31, 2012.
And there was much shrieking and hair pulling ...
and confusion has reigned ever since...
So let me attempt to bring some clarity to this matter:
First of all, there are, and always have been, three versions of HAFA - the Treasury version, the Fannie Mae version and the Freddie Mac Version. And, all three had major differences which led to many a short sale going up in flames at the 11th hour when handled by unwary and ill informed real estate agents and/or third party negotiators (I've said it before, and I'll say it again, YOU CANNOT DEPEND UPON THE PERSON AT THE OTHER END OF THE PHONE WHEN YOU CALL THE SERVICER (BANK) TO GIVE YOU ACCURATE INFORMATION REGARDING GUIDELINES WHEN IT COMES TO SHORT SALES.)
Secondly, the changes are all good. So relax!
So, back to the confusion caused by Treasury releasing updates to HAFA policy at the same time that Bank of America is announcing that HAFA is expiring. What gives, you ask?
Bank of America was talking about the Fannie Mae and Freddie Mac HAFA programs which were expiring BECAUSE they had already released their new HAFA II/Standard Short Sale Program guidelines during the summer with changes to become effective November 1, 2012. The changes made to their programs streamlined the program and brought their guidelines in line with each other.
The Treasury Department was actually late to this party and released their changes in an effort to bring their version of HAFA more in line with Fannie and Freddie's new streamlined versions.
Here are three major changes to the Treasury version of the HAFA program:
- Borrowers who are 90 days or more delinquent and have a FICO (credit) score below 620 will be deemed to have a "pre-determined" hardship therefore Servicers will not be required to further validate the hardship in order to approve the short sale.
- The maximum amount available to pay off subordinate liens has been increased to $8,500.00.
- The amount of time a Servicer has to respond to a request for a HAFA short sale has been cut to 30 days.
For more information regarding the changes to the Fannie/Freddie programs, see my post entitled New Short Sale Guidelines - 3 Things Every Underwater Needs To Know and for more detailed information regarding any of these programs, you can contact me at 603-490-5344.