The HAFA Short Sale Advantage in Hawaii

Many individuals have had to consider the option of doing a short sale, but some people were afraid to do this because Hawaii is a recourse state. This means, the amount forgiven at the close of a sale is “phantom income” and there is a tax consequence due even if you have no money to pay it. Now I have found out the HAFA (Home Affordable Foreclosure Alternatives) short sale offers some advantages the other short sales don’t.

How can a seller find out if they are eligible to qualify?

1. First position loan created prior to 2009 (must be, or recently must have been borrower’s principal residence)
2. Must have financial hardship
3. Maximum loan balance not to exceed $729,750
4. Borrower’s liquid assets not to exceed $5,000
5. Borrower is delinquent, or default is reasonably foreseeable

If you are a seller in this situation, you may be solicited from the service provider who is handling your loan. This will be a letter indicating you might be eligible for a HAFA short sale.

• You have 14 days to respond to this letter, so look for it
• The agent you select to help you must be “an arms length” away…no friends, family, or business associates can handle your case
• You need to request a short sale. Don’t let the loan service provider tell you the borrower must apply for and fail in Hamp modification. This is a misconception, and it is not true. The borrower does not need to go through a loan modification process; They can go directly to a short sale.

The advantages are the following:

• Relocation assistance of $3,000
• A foreclosure sale must be suspended while eligibility is determined, the property is marketed, or closing is pending
• Sellers are released of all liability on 1st and all subordinate liens
• Seller cannot be required to sign a note or pay any additional amounts to satisfy liens
• Short sale amount is pre-approved
• Purchase contracts get an answer within ten business days
• Lien holders may receive up to $6,000 total for pay off to subordinate liens
• Mortgage payments are reduced to an affordable level, or not required

Note: If you are an agent buying a HAFA short sale, you are not eligible for a commission. A buyer of a HAFA short sale can’t flip it within 90 days of closing.

Here is a good resource for information. This program will go until December 31, 2012. If you are a buyer, you may want to look for homes advertised as a HAFA short sale as you may find you get a response much more quickly.

Aloha, take care,
Diane Chavez, RS, ABR, GRI
diane@hawaiilife.com