Short Sale Power

On June 1, 2010, Fannie Mae released Servicing Guide Announcement  for Fannie Mae’s Home Affordable Foreclosure Alternatives. Program to provide servicer guidance and direction for using the short sale or deed-in-lieu (DIL) process for borrowers who qualified for, but did not complete, a loan modification under the Home Affordable Modification Program (HAMP). Fannie Mae’s HAFA will provides financial incentives to servicers and borrowers who utilize a short sale or a deed-in-lieu (DIL) of foreclosure to avoid a foreclosure on eligible loans, which helps preserve the condition and value of the property by minimizing the time a property is vacant and subject to vandalism and deterioration. The effective implementation date is August 1, 2010; however, servicers are encouraged to implement the Fannie Mae HAFA earlier than that date.

THE HAFA Program Summary

The Fannie Mae HAFA program simplifies and streamlines the use of short or “preforeclosure” sale and deed-in-lieu of foreclosure (DIL) options by incorporating the following unique features:

• Complements HAMP by providing alternatives for borrowers who are HAMP eligible (including borrowers facing imminent default)
• Utilizes verified borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis;
• Allows the borrower to receive pre-approved short sale terms prior to the property listing;
• Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement;
• Releases the successful HAFA borrower from future liability for the debt;
• Uses standard processes, documents, and timeframes;
• Provides financial incentives to borrowers, servicers and subordinate lien holders.

Incentive Compensation

Servicer Incentives

• Short sale – $2,200 incentive fee
• DIL – $1,500 incentive fee

No servicer or borrower incentive will be paid for short sales on Fannie Mae second lien mortgage loans.

Borrower Incentives

• Short sale or DIL – $3,000 to assist with relocation expenses

In most circumstances, the borrower will receive funds at closing of a short sale or within 5 days after the servicer’s acceptance of a DIL, provided the borrower has vacated the property and left it in acceptable condition.