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GSEs to Begin Accepting HAFA Short Sales
BY: CARRIE BAY from www.DSNEWS.com
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annie Mae and Freddie Mac both issued new guidelines to servicers Tuesday, which allow homeowners with GSE loans to pursue a short sale or deed-in-lieu of foreclosure if they are unable to secure a modification under the government’s foreclosure prevention program.
When the Treasury’s Home Affordable Foreclosure Alternatives (HAFA) program rolled out in early April, officials explained that the GSEs’ loans were not eligible – an interesting omission considering Fannie and Freddie are operating under full government control and have been positioned as the support columns of the administration’s response to the housing crisis.
The GSEs’ exclusion from HAFA was puzzling to a number of industry experts and a common query posed by our DSNews.com readers. In response, Treasury officials said then that they were anticipating Fannie and Freddie to launch their own short sale-friendly programs – and those announcements came Tuesday.
Both Fannie Mae and Freddie Mac encouraged servicers to begin implementing their HAFA procedures “immediately.” By August 1, 2010, all Fannie Mae and
Freddie Mac servicers must have incorporated HAFA into their operations and begin offering HAFA solutions to eligible borrowers. The program is effective through December 31, 2012.
Like the original HAFA guidelines issued from Treasury, Fannie and Freddie loans must first be found eligible for the Home Affordable Modification Program (HAMP). If the borrower then fails to fulfill their HAMP obligations, a HAFA short sale or deed-in-lieu will be offered, but unlike the non-GSE HAFA program, Fannie and Freddie stipulate that HAFA can be applied only after “all other home retention workout options have been exhausted.”
According to the HAFA servicing guide issued by Fannie Mae, “All servicers must implement Fannie Mae’s HAFA for all conventional mortgage loans that are held in Fannie Mae’s portfolio, that are part of an MBS [mortgage-backed securities] pool that has the special servicing option, or that are part of a shared-risk MBS pool for which Fannie Mae markets the acquired property.
Freddie Mac’s HAFA servicing bulletin specifies “first-lien mortgages owned, guaranteed, or securitized by Freddie Mac that were originated on or before January 1, 2009.”
The GSEs will pay financial incentives to both servicers and borrowers who make use of a short sale or a deed-in-lieu to avoid a foreclosure on a HAMP-eligible loan. Servicers will receive $2,200 for every HAFA short sale and $1,500 for every HAFA deed-in-lieu completed. Borrowers are entitled to an incentive payment of $3,000 to assist with relocation expenses.
The Treasury recently raised its HAFA payouts. For both short sales and deeds-in-lieu completed on non-GSE loans, servicers get $1,500, and $3,000 goes to the borrower.
REO’s sold during April plunged
By: Diana Olick
CNBC Real Estate Reporter
Last year, when the rest of the nation’s housing was still reeling from recession, California started to show signs of life.
Sales increased and prices stabilized, despite the fact that it was one of the hardest hit states with one of the highest foreclosure rates.
California’s savior was investors.
They came in fast, cash in hand, and started snatching up distressed properties at a fast pace.
That interest appears to be waning.
While sales of existing homes shot up across most of the nation in April, they fell in the West, down 6.2 percent.
“The sales are lower because of lack of inventory on lower-priced homes,” says Lawrence Yun of the National Association of Realtors. “The California market was one of the first markets to go down sharply but also the first market to rebound.”
The inventory of low-priced homes is low because of big investor demand initially and because banks are being very careful with REO (bank owned) properties, releasing them slowly onto the market so as not to tank prices.
But that’s not all of it.
“We know the tax-credit has pushed low-priced houses up sharply and investors have backed away big-time in recent months, not wanting to compete with a bunch of first-timers and their Obama coupons,” says mortgage analyst Mark Hanson. “Perhaps this is the end of the demand cycle from first timers and investors who have had their fill.”
On the other hand, some of the numbers may be skewed due to the increasing prevalence of short sales, where the bank allows the home to be sold for less than the value of the mortgage.
“The proportion of damaged foreclosed properties or so-called real estate owned (REO) sold during April plunged,” according to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. “Damaged REO accounted for 15.4 percent of transactions in March, but only 12.8 percent in April. One reason for the drop in damaged REO may be increasing numbers of short sales.”
Now that the tax credit is over, and foreclosures are moving through the bank pipelines more quickly, perhaps investors will come back in larger numbers. Prices are certainly low enough!
