Wednesday, November 7, 2012

New Short Sale Rules - Treasury issues Supplemental Directive 12-07

Some of the highlights of the Directive are as follows:


  • Use of certain HAFA documents will now be optional rather than mandatory, so long as the servicer communicates essential HAFA terms to the borrower in some written form.
  • Borrowers who request HAFA consideration and are ninety (90) days or more delinquent and have a FICO score that is less than 620, will be deemed to have a “pre-determined” hardship. Borrowers with a pre-determined hardship must execute a Hardship Affidavit prior to closing of the HAFA transaction; however, servicers will not be required to further validate the hardship.
  • Treasury will now require both the seller (borrower) and purchaser in a HAFA short sale transaction to execute a new HAFA affidavit prior to closing that certifies, among other attestations, that the sale represents an arms-length transaction and that no money is being given or received that is not reflected on the HUD 1 Settlement Statement. 
  • The time frame for servicers to make a decision on a borrower’s request for HAFA has generally been shortened to 30 calendar days. 
  • Treasury is increasing the incentive it will provide for permitting gross proceeds to be used to pay subordinate mortgage liens.
  • The current prohibition against resale of a property for 90 calendar days following a HAFA closing is being changed to prohibit any resale within 30 calendar days and prohibiting a resale for more 120% of the HAFA short sale price between 31 and 90 calendar days of the HAFA closing.


Also, notate that these new rules are effective on 2/1/13, not immediately.

To read the Supplemental Directive in its entirety, click here.

Surviving the rule change is the following:

A statement that if the borrower has a real estate license, he or she cannot earn a commission selling his or her own property and may not have any agreement to receive all or a portion of the commission after closing;


Real Estate Agents - this does not mean to try to creatively earn a commission on your own short sale. You will likely face charges of perjury &/or fraud. Its just not worth it. Instead, simply hire a friend whom you respect at your company to represent you in your short sale.

I just want to make a point of the fact that HAFA offers a proactive short sale. Being proactive with obtaining lender approval is the ONLY sensible way to seek out a short sale these days. Push your clients, attorneys and friends to work under the HAFA program. If you do, you will agree that HAFA is the way to go.