NEW ORLEANS — Big news affecting home owners involved in the short sale process: The federal government program to help people avoid foreclosure by doing a short sale is so time-consuming and cumbersome that it’s discouraging would-be home buyers from purchasing short-sale properties, speakers said at the National Association of RELATORS® annual convention yesterday.

According to the National Association of REALTORS®’ most recent REALTORS® Confidence Index, 12% of all recent home buyers purchased their home through a short sale.

The Home Affordable Foreclosure Alternatives Program (HAFA) was intended to help owners avoid foreclosure by streamlining the short-sale process and providing incentives to lenders that complete short sales. In a short sale, the lender lets a home owner to sell his house for less than what the home owner owes on the mortgage.

“NAR has been urging lenders and servicers to approve reasonable short sale offers that allow home owners to avoid foreclosure when a family is absolutely unable keep their home,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz.

HAFA includes uniform procedures, standards forms, and deadlines, but its success depends on mortgage servicers using the program correctly and whether mortgage investors and second-mortgage holders cooperate.

Lenders have been criticized for cumbersome and confusing short-sale processes. JK Huey, senior vice president, Wells Fargo Home Mortgage REO and Short Sale, addressed those concerns and talked about the myths surrounding these transactions.

“There are a number of decision-makers involved in a short sale, and the more parties involved, the more complex the process becomes,” said Huey.

To address concerns related to the short-sale process, Wells Fargo has increased staff resources by 57% over the past 12 months, implemented proactive marketing efforts to provide information and education on short-sale workout alternatives to its customers, and worked with legislators and government agencies to help streamline processes.

Panelist Laurie Maggiano, director of policy for the U.S. Department of the Treasury’s Office of Homeownership Preservation, explained how the program benefits home owners. HAFA provides $3,000 relocation assistance to homeowners after a successful closing. Lenders have to agree not to go after the home owner for the difference between the sales price and what’s owed for all mortgages on the house. 

“HAFA offers additional foreclosure avoidance options when other home retention options have been exhausted,” said Maggiano. “Being proactive can only positively impact the home owner’s ability to buy a home in the future. For example, Fannie Mae will allow a home owner to be considered for a home loan within two years of a short sale, whereas a homeowner who goes through a foreclosure will need to wait seven.”

REALTOR® Greg Markov, co-owner of AZ Short Sale Experts, LLC, and Phoenix Heritage Real Estate Group, HomeSmart, said that for HAFA to succeed, all parties must agree to act and negotiate in good faith.

“If we believe in short sales, it’s reasonable to believe in standardized short sales,” said Markov. “Is HAFA the answer? It can be, but much remains to be done.”

Source: NAR