Short Sales and Foreclosures
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Short Sales and Foreclosures
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Short Sales and Foreclosures

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Obama Administration Announces Enhancements to HAMP, FHA Refinances

On March 25, 2010, the Obama Administration, including Federal Housing Administration (FHA) Commissioner David H. Stevens, announced changes to the Home Affordable Modification Program (HAMP) and enhancements to the FHA's refinance program. The Federal cost of these changes will be funded through the $50 billion allocation for housing programs under the Troubled Asset Relief Program (TARP).

Under the HAMP enhancements, unemployed borrowers meeting eligibility criteria will have an opportunity to have their mortgage payments temporarily reduced to an affordable level for at least 3 months and up to six months for some borrowers while they look for a new job. Eligible homeowners under HAMP must live in an owner occupied principal residence, have a mortgage balance less than $729,750, owe monthly mortgage payments that are not affordable (greater than 31 percent of their income) and demonstrate a financial hardship. Servicers are required to consider an alternative modification approach that emphasizes principal relief.

The FHA refinance option provides more opportunities for lenders to restructure loans for some families who owe more than their home is worth. This is a voluntary program for lenders and homeowners and is primarily targeted to non-FHA borrowers refinancing into a FHA-insured mortgage. To be eligible for a FHA refinance homeowners must be current on their mortgage. This rewards responsible homeowners and creates stabilizing incentives in the housing market.

Total mortgage debt for the borrower after the FHA refinancing, including both first and any other mortgages, cannot be greater than 115 percent of the current value of the home. This will give homeowners a path to rebuild equity in their homes and an affordable monthly payment. Lenders must write down principal of the original first mortgage at least 10 percent to reduce the debt burden on borrowers and the loans may not exceed 97.75 percent of the value of the home. All mortgage debt including second liens must be written down to a maximum of 115 percent of the current value of the home.

HAMP Enhancements Overview
FHA Refinances for Underwater Homeowners
HAMP, FHA Refinances FAQ
Helping Homeowners with Financial Hardships: Two Examples


Rising mortgage defaults are leading many homeowners to put their homes on the market and negotiate a short sale with their lenders.

A short sale* is a transaction for the sale and purchase of real property where the purchase price is less than the amount required to pay off the liens on the real property, such as mortgages, judgments, taxes, homeowner or condominium association fees, assessments, as well as closing costs including but not limited to brokerage commissions, realty transfer fee, and attorney's fees.

The prospect of a short sale often raises the need for additional disclosure to the buyer and requires that a third party approve the transaction. Short sales are a growing sector in today's market, which is consistently creating new opportunities and challenges.

*Short sales can have serious legal, credit and tax implications. Always advise the buyers and sellers with whom you are working to consult an attorney with regard to potential short sales whenever the interests of that party seem to require it.

 

For Consumers Facing Foreclosure

HUD Takes Action to Speed Resale of Foreclosed Properties to New Owners

On January 15, 2010, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan announced a temporary policy that will expand access to Federal Housing Administration (FHA) mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure.

With certain exceptions, the FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties. The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will also allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. For the details of this new temporary policy, visit the HUD website.  

If your customers are having difficulty making mortgage payments, they are advised to consult their lender or loan officer. They can explore options other than foreclosure, such as forbearance or refinancing. Below are loan modification programs and refinancing options being offered through various organizations:

As REALTORS®, we work to help people to afford to stay in their homes. If residents are having difficulty making their payments and cannot continue with their home mortgage, a short sale may be a viable option.


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