San Diego Short Sales: The Government Short Sale Program

All right, in this next section of our consultation we are going to talk about the government short sale program which is known as the HAFA program. This program was implemented in 2010. In April was the first step of it and the second step was implemented in August so there are two different parts to it but don’t worry about that too much. This is a new government program available that can be very beneficial for homeowners who are experiencing hardships. Basically, what will happen with the government short sale program is this: one, the homeowner will be able to walk away free and clear guaranteed. They will never owe anything back to the bank. The second thing that will happen is the homeowner will actually be given $3,000 at the sale of the property for relocation and moving expenses which can be tremendously beneficial for certain home owners out there that are in distress.

Without getting into too much detail, again, there are two different programs or two different aspects to this government short sale – those loans that are owned by Fannie Mae and Freddie Mac and those loans that are not owned by them. But in order to do a HAFA or government short sale the homeowner or the borrower has to meet a couple of criteria. Some of these criteria are as follows so you’d want to take into consideration whether or not this would be applicable to you. First and foremost and most importantly, this is for primary residence homeowners. This is not for investment properties or second homes. You have to live in this home or it has to be the last home that you’ve lived in in order for it to apply. Second, your loan had to be originated before 2009. Currently, your mortgage has to be late or you have to anticipate that you’re going to be coming late in the upcoming near future. Your loan amount has to be less than $729,000. Your total mortgage payment needs to exceed 31% of your total income.

Now, don’t worry about that too much ‘cause we’ll kind of make it a determination when we’ll do a consultation about that. The last criteria that has to be met is that the homeowner either one, has to have tried a loan modification and failed or they have just simply asked to do a short sale. They don’t want to do a loan modification. If you meet those criteria, then there’s a very good chance that you will be eligible for this program and you wouldn’t have to worry about owing any money back to the bank and you may be eligible for $3,000.

If you do meet these guidelines it is important to understand that it’s up to the bank to decide whether or not they’re going to allow you to do this. For Fannie Mae and Freddie Mac, it is a mandatory thing that they do this for you; if it’s not then it will be up to the bank to decide but we are seeing right now that most lenders out there, especially the large ones like Bank of America, Chase and Wells and City Mortgage are all doing these government short sale programs. We have a tremendous success doing these right now. We have a ton of them currently going on and we are closing on some of them as well. It is actually a government program that is working and is in place today. Understand this, at my particular company, we submit every single short sale file as a half assured sale. We want the bank to make the determination, the decision whether or not they’re going to allow you to do this so that’s for your benefit as well if you decide to work with us. The other thing to note about is that this is a very complicated and tricky program. Not a lot of real estate agents know about that. They don’t know the nuances about it and they don’t know how to implement it and they don’t know the proper government paperwork that needs to be submitted so it is in your best interest to understand that and work with a real estate agent or broker that is certified to handle these government short sale programs.

Now, I will say that I’m certified with HAFA short sales through the California Association of Realtors. I’ve taken all the classes and I’m very, very familiar about all the particular guidelines. Likewise, I also teach short sales and teach other people about these guidelines as well so we’re very well-versed on them. We submit every short sale through this program. What happens if for example the bank says, "No, you are not allowed to do a HAFA short sale or you are denied?" That’s fine. You can still do a traditional short sale. All that means for the homeowner is that one, you’re not going to receive that $3,000 at closing for your moving expenses and two, you’re going to have to negotiate for that deficiency release like we talked about in the other part of the video and that comes down to how good your real estate agent is in negotiating that with the bank. It doesn’t mean you won’t get the deficiency waive. It just means it’s not an automatic guarantee. Well, talk about that. I will be able to tell you during a consultation with you individually whether or not you meet the requirements for the government short sale program and if that would be something that would be beneficial to you. Thank you very much. This has been the HAFA short sale portion of our consultation.