Foreclosure Guidelines Announced to Help Troubled Homeowners

The U.S. Treasury Department has released new guidelines designed to help struggling homeowners through the short sale process.

The new guidelines for the Home Affordable Foreclosure Alternatives (HAFA) program were released on Nov. 30.  According to an article provided by the Silicon Valley Association of Realtors, the program:

• Provides an alternative for borrowers who might be eligible for the Home Affordable Modification Program (HAMP), but are unable to keep their homes.
• Uses the borrower's financial and hardship information that has already been collected for consideration of a loan modification.
• Allows a borrower to receive preapproved short-sale terms before listing the property, including the minimum acceptable net proceeds.
• Prohibits servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement, up to 6 percent.
• Requires borrowers to be released from future liability for the first mortgage debt.  No cash contributions, promissory notes, or deficiency judgments are allowed.
• Uses standard processes, documents, and time frames/deadlines.

The program also provides the following financial incentives:

• $1,500 for borrower relocation assistance.
• $1,000 for servicers to cover administrative and processing costs.
• Up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders on a one-for-three matching basis.

The program, which was created to provide incentives for short sales or deeds-in-lieu to avoid foreclosure on eligible loans, will not be effective until April 2010.  It will run from April 5, 2010 until December 31 2012.  Servicers can, however, implement the program before April 5 if they meet certain deadlines.

It can be difficult to fully understand the terms of these programs. To learn if you qualify for federal assistance under the foreclosure alternatives program or the home affordable modification program, click here to find a bankruptcy attorney near you!