The 6 most common short sale incentive programs
In short sales, homes are sold for less than what is owed and the bank forgive the excess debt. Banks have been unwilling to approve such deals in past since they take a loss on the home, but in certain cases it become a much better proposition than letting the homeowner fall into foreclosure. Incentive Programs for Short Sales are now being offered by individual banks and lending institutions. While the programs themselves are not new, the fact that they have been a featured topic on many news media sites has brought a renewed interest in these programs. Most common short sale incentives program are here;
Home Affordable Foreclosure Alternatives (HAFA) Program:-
If you can’t afford your mortgage payment and it’s time for you to transition to more affordable housing, the Home Affordable Foreclosure Alternatives SM (HAFA) program is designed for you. HAFA provides two options for transitioning out of your mortgage: a short sale or a Deed in Lieu (DIL) of foreclosure. In a short sale, the mortgage company lets you sell your house for an amount that falls “short” of the amount you still owe.
HAFA offers benefits that make the transition as favorable as possible:
- You can get free advice from HUD approved housing counselors and licensed real estate professionals.
- Unlike conventional short sales, a HAFA short sale completely releases you from your mortgage debt after selling the property. This means you will no longer be responsible for the amount that falls “short” of the amount you still owe. The deficiency is guaranteed to be waived by the services.
- In a HAFA short sale, your mortgage company works with you to determine an acceptable sale price.
- HAFA has a less negative effect on your credit score than foreclosure or conventional short sales.
Banks are not in the business of making life easier for its customers much less it’s short sale candidates. Banks are in the business to turn a profit. The main reason Bank of America has initiated the Cooperative Short Sale is to increase the bank’s bottom line profit.
The bank faced several problems:
- Bad reputation for taking too long to process short sales.
- Due to length of time to buy a short sale, buyers were making lowball offers.
- Unsure of how to do a short sale, many agents were pricing short sales inappropriately.
You can hire a real estate agent if you want to, but it’s not a necessary step to get preapproved for the short sale. Here is the old way the program worked in a nutshell:
- Write a hardship letter.
- Send the hardship letter to the bank and ask the bank to do a Cooperative Short Sale.
- Follow up with Bank of America weekly to make sure your Cooperative Short Sale is being processed.
Transition assistance program (TAP):-
The Transition Assistance Program (“TAP”) is one of CalHFA MAC’s federally-funded programs developed to provide eligible homeowners with transition assistance when it is determined that they can no longer afford their home. TAP is used in conjunction with short sale and deed-in-lieu programs to help homeowners make a smooth transition to housing. Homeowners are required to occupy and maintain the property until the home is sold or returned to the lender as negotiated. TAP is designed to target low-to-moderate income homeowners and address the needs of a homeowner’s specific situation in lieu of targeting certain regions or counties. Homeowner must qualify as a low-to-moderate income house hold, as follows:
- Homeowner is presumed to satisfy income limits if they have a loan financed in whole or in part by bonds that are tax exempt under IRC section 143.
- Homeowner must complete and sign a Hardship Affidavit / 3rd Party Authorization to document the reason for the hardship.
- Homeowners who have recently encountered a financial hardship due to their military service are eligible.
- Homeowner must agree to provide all necessary documentation to satisfy program guidelines established by CalHFA MAC.
It helps to look at the short sale process adopted by the other major banks. Once you realize what hell those banks put a seller and buyer through, you’ll understand why Wachovia is special. Before rendering an opinion on the short sale, Wachovia asks for basically 3 things:
- The buyer’s and seller’s signed purchase offer.
- The buyer’s preapproval letter.
- The seller’s listing agreement.
Litton Loan Servicing frequently sends borrowers letters asking them to participate in a short sale and offering an incentive in the letter. Sellers should read their mail and saved the letter so that they can redeem the incentive at closing usually between three and five thousand dollars. Litton Loan Servicing is one of the best lenders to work short sales with. They have one of the fastest processing turnaround times among all major lenders, and also one of the highest percentages of approvals as well. Their average short sale approval time is approximately 2-3 weeks from the time they receive a completed short sale package. They are even “pre-approving” short sale many times right now in advance of an offer.
JPMorgan Chase has adopted a range of incentives to borrowers that agree to a pre-foreclosure sale because if we can’t work out a modification, a short sale is a better result for the borrower, the services, the investor, and the neighborhood then a foreclosure. Chase says the amount of the offer “depends on a number of factors” but declined to share specific details on how much money it’s been providing to short sellers. In terms of the exact dollar amounts, their short sale incentives range between $5,000 and $30,000 plus a borrower can earn an additional $3,000 in addition, if a successful HAFA short sale is completed.