Short Sale Process May Be Improving

The current way lenders handle short sales is very inefficient and frustrating for everyone involved in the process.  It is very obvious to me, as a Realtor, that something needs to change.  The short sale negotiation process currently takes anywhere from 90 to 180 plus days, during which time the house sits vacant and deteriorating.  The Treasury Department recently released a new plan called the Home Affordable Foreclosure Alternative Program (HAFA) that may help to streamline the short sale nightmare.  HAFA does not apply to Fannie Mae or Freddie Mac loans, but we are expecting a similar plan to come out soon from them.  HAFA will allow the borrower to obtain short sale pre-approval prior to listing the property, which will hopefully drastically cut back on the amount of time a buyer has to wait for a response from the lender on an offer.  Another main component that may help ease borrower’s minds, is the HAFA plan requires that borrowers are released from any future liability associated with the first mortgage (no cash required at closing, no promissory notes, or deficiency judgments).  I know from my experience, the possibility of a seller getting a deficiency judgment has been a big issue.

Of course, HAFA is complicated (what government program isn’t?).  The program contains 43 pages of guidelines and forms that are supposedly going to make a short sale easier.  I guess we will see when the program officially rolls out April 5, 2010.

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Tags: borrowers, buyers, foreclosure, sellers, short sale