A ton of rumors and half truths have been flying around this month regarding changes the banks are required to make in the handling of short sales. I have gotten several calls from potential sellers who believe that the process is now simplified. While that CAN be true, there are a number of factors that determine whether or not your home will qualify for the expedited processing.

Bad news first-

• This program does not help with second mortgages or HELOCs. However, the information you gather for your application package MIGHT help you or your Realtor negotiate with the second lender.
• You cannot go straight to a short sale without going through the process of applying for refinance or modification.

PLEASE NOTE- There are a lot of home loan modification programs available through individual lenders, this is only in reference to the Making Home Affordable program. Here are the steps you have to take to determine eligibility.

1. First you have to determine if you are eligible for a REFINANCING through this program. Here’s how:

•      You must be the owner of a home that has a loan insured by Fannie Mae or Freddie Mac. You can check online for Fannie Mae or Freddie Mac to see if your home qualifies. 
•  The first mortgage must be for an amount no more than 125% of what you owe. In other words, if your home is now worth $200,000 and you owe $250,000, you could qualify, but if you owe $275,000 you would not. If you aren’t sure of your homes current market value, please contact me 
• You must be current on your mortgage payments.

If you do not meet those requirements you may qualify for a LOAN MODIFICATION, which can lower your monthly payments to an affordable level. To qualify for a modification you must meet the following:

• The home must be your primary residence
• The loan must be for less than $729,750
• You must have gotten the loan before January 1, 2009
• Your payment; including principle, interest, taxes, insurance and HOA dues must be more than 31% of your gross income. If you need help determining this, CLICK HERE 
• You must have either had a) a significant change to your payment amount or b) a change in circumstances that makes your payment a hardship.  This can be a loss of income, a health crisis etc.

If you meet all those requirements, you MAY qualify for a loan modification through the Making Home Affordable program. If you do NOT qualify for a refinanace or a loan modification, or are unable to make the payments that are arranged through the MHA program, you may then qualify for the expedited review process on a short sale. Those  guidelines state:

• You must have applied for the refinance or loan modification (above) and been turned down OR
• Been approved but be unable to complete the trial period for your new payments OR
• Be late for two consecutive months AFTER completing the trial phase successfully OR
• You may simply request a short sale after your application has been approved

At this point you will be participating in the Home Affordability Foreclosure Alternatives program, or HAFA. Here’s how that will help you:

• You will already be qualified, eliminating the need for the often lengthy approval process
• You will be able to have a pre approved price for your short sales prior to listing the home
• Lenders have to release you from future liability (see note above regarding second mortgages)
• Lenders will not be allowed to reduce the commissions to the real estate agents. They often do this at the last moment now, something that has made many agents shy away from representing short sale sellers. (At Alise Roberts and Co, we have always provided the same excellent service to our sellers involved in a short sale as we do to any other client)  
• An incentive is provided to lenders to encourage them to participate in this program, increasing the chances of more lenders participating.

Overall, I think the MHA and HAFA programs will help a lot of sellers, if they make use of it. Education yourself on alternatives is so important. Often, homeowners facing foreclosure do nothing but wait for what they think is the inevitable. I can tell you from helping dozens of families this year- know your options.