The two alternatives to homeowners are:
- the short sale
- deed in lieu of foreclosure, or (DIL)
A short sale is when the service provider who holds the loan allows a borrower to list and sell the mortgaged property with the understanding the net proceeds from the sale may be less than the total amount due on the mortgage. The service provider accepts the short payoff in full satisfaction of the total amount due on the first mortgage. If there are subsequent mortgages, HAFA will allow a $6,000 maximum pay off to subordinate loans.
The deed in lieu of foreclosure is where the borrower voluntarily transfers ownership of the mortgaged property to the service provider in full satisfaction of the total amount due on the first mortgage. (Most of the time a borrower would be required to try to sell the home as a short sale prior to the service provider agreeing to accept the DIL. In some instances, an investor may accept a DIL).The borrower must provide marketable title free and clear of mortgages, liens, and encumbrances and the service provider may not require a cash contribution, or note (promissory) from the borrower. The service provider must forfeit the ability to pursue a deficiency judgment against the borrower.
Try these websites: www.HMPadmin.com, or www.MakingHomeAffordable.gov for eligibility requirements for HAMP and HAFA programs. Other websites to review would be: www.eFannieMae.com, or www.FreddieMac.com.
Note: A borrower in bankruptcy who is in Chapter 7 or 13 must be considered for HAFA if the borrower, the borrower’s counsel, or bankruptcy trustee requests consideration.
Diane Chavez RS, ABR, GRI firstname.lastname@example.org