Hope for Homeowners – Home Affordable Foreclosure Alternatives

Even as the economic conditions appear to be stabilizing,the rate of borrowers defaulting on their mortgages goes unchanged. These unprecedented times have resulted in a diverse group of people working together to devise solutions. One of the main obstacles to dealing with homeowners facing foreclosure has been a lack of standard process and the uncertain timeframes.

The Federal government is leading the way in defining guidelines via the Making Home Affordable program. These guidelines apply to  non-GSE (Government Sponsored Engerprise)-backed mortgages  and allow for participation by the servicers of non-GSE-backed mortgages.

Almost a year ago, the Treasury Department Supplemental Directive 09-01 defined the eligibility, underwriting and servicing requirements for the Home Affordable Modification Program (HAMP). While this beginning had high expectations, the reality is that very few mortgage modifications have been successful. As many of the decisionmakers have grown to better understand the enormity of the problems, government guidance has progressed to a more recent directive 09-09 that is known as Home Affordable Foreclosure Alternatives (HAFA) program. This directive provides guidelines, process and time frames for mortgage servicers so we can become much more efficient in dealing with what I feel is the most viable solution to foreclosure: short sales.

One of the sticking points to successfully completing a short sale has been the existence of secondary lien holders. Secondary lien holders stand to have their interest in a property wiped out should a property complete the foreclosure process. Still it is not uncommon for the secondary lienholder to refuse to allow a short sale to complete without some payment in lieu of the debt owed. The latest guidelines recognize this impediment and provides for financial incentives to work out with the secondary lien holder.

Property condition is always a concern in distressed property situations. The latest guideline includes financial incentives to have the borrower turn the property over to the servicer in good shape and with clear title.

These guidelines are even dealing with the issue of the unsatisfied debt. Participants in this government program are waiving their right to collect additional sums after the property sale. So there will be no cash contribution or promissory note from the borrower.

Perhaps the most enlightened component of 09-09 is the attempt to place time frames for servicer response to a short sale application.

I think things are slowly moving in the right direction. The government and lenders are recognizing that process and time frames are key to the resolution of the current foreclosure environment.  It has taken time to begin to pull together the trained staff and organizational infrastructure necessary to deal with the immense proportions that define the current mortgage environment.

On our part it is more than a full-time job just keeping up with the changes in the distressed property environment. We take this challenge seriously and put in the time. The presence of distressed property and the families affected will be with us for some time to come.  There is no quick fix on the horizon.  As full-time Realtors and advanced members of the Certified Distressed Property Expert (CDPE) organization, we strive to stay current with industry and market trends. We also see it as a moral obligation to promulgate this information so that the general public can make informed real estate decisions.