Repost – Types of Short Sale Programs by Jonathan Katz
There are different types of short sale programs from which you can choose best suited for you. Choosing a short sale program is really critical because selection of wrong program will not only cause the rejection of short sale, but also will waste your time money and resource. There are a number of short sale programs, but keep in mind that you may not be able to choose the specific programs. The selection of program may depend upon the type of loan and investor.
Different Types of Short Sale Programs:
Some of the most common short sale programs are given here to provide you an understanding of the options available to you.
Traditional Short Sale
A traditional short sale is the most common type of short sale program. Some short sale sellers don’t want the delay that can be inherent in government programs, so even though they might qualify for a Bank of America HAFA short sale, they opt for traditional short sale program just to avoid the delayed processing. For traditional short sale you will need to provide the hardship letter along tax returns and other documents. More and more banks will say, “Yes” to a short sale and “No” to a foreclosure.
VA Short Sale and FHA Short Sale
If your current loan is secured by the VA, then you have VA loan and if it is insured by FHA, you have an FHA loan. The best way to know about your loan plan whether it is VA or FHA, is looking at the percentage of original sale price. In the form of VA, your loan balance is 100% of the original sale price. If the original balance was closed to 97% of the sale price then it is probably an FHA loan.
The main things to know about a VA short sale and FHA short sale:
- Neither type of loan will qualify for the HAFA short sale program, but you can receive a relocation incentive.
- Due to the additional layer to the approval, your proposal will take more than the normal time required to close the short sale.
- The government will pay for a full-blown appraisal (no BPO) and expect market value.
HAFA Short Sale Program
In case you have two or more than two lenders then you will need the participation of all lenders in HAFA short sale program to qualify for HAFA short sale. The HAFA is government short sale program that with few limitations can pay you or your bank up to $3,000 to do the short sale. In the starting of HAFA program guidelines were very strict, but with the passage of time these have been made relaxed. You can do a HAFA short sale on investment property now as well. The biggest benefit of HAFA short sale is that your bank has to release you from the personal liability and you don’t have to face deficiency judgment.
Freddie Mac Short Sale
Freddie Mac is also a government sponsored entity. If the Freddie Mac is an investor, then you will need to do a Freddie Mac short sale. This will be adding an extra layer to the approval of the short sale. Freddie Mac will need a long affidavit to be signed. In the case of Freddie Mac home will be sold at “as is” condition. Unlike many short sale investors, Freddie Mac will allow the seller to rent back for a few months.
Fannie Mae Short Sale
Fannie Mae is a government-sponsored entity. If Fannie Mae is the investor, then you will need to do a Fannie Mae short sale and this will be adding and additional layer of approval to the short sale process.
You might have a problem in that short sale if you have a second loan and that second lender demands more money than Fannie Mae would allow you. It may require dealing with second lender before opening the short sale at Fannie Mae. Fannie Mae normally does not postpone auctions. If you are closer to the trustee’s auction than you are to closing the short sale, Fannie Mae may opt to choose the foreclosure.
Fannie Mae HAFA Short Sale
Fannie Mae HAFA short sale program is considered the most complex short sale program. The government has been trying to make the processing of this program easy. It is possible that short sale would be delayed if your Fannie Mae short sale is through the Bank of America. You may have some relaxation if you are the principal resident of your home, but Fannie Mae no longer requires occupancy as a condition of the short sale. It is also no longer a requirement that your loan be delinquent.
Freddie Mac HAFA Short Sale
A Freddie Mac HAFA short sale needs to be preapproved in advance. This is also one of the complex short sale programs. The preapproval in advance itself is a biggest problem for some banks. Every bank does not seem to understand this preapproval requirement for a Freddie Mac HAFA short sale, but if your short sale program is approved by Freddie Mac and your servicer, it moves really quickly. You can expect to get approval within 30 to 60 days.
Cash for Short Sale Programs
Getting the cash for sale is the wish of every short seller, but there are rare chances that debt is forgiven and sellers are released from the personal liability. Consulting your bank is the better way to find out that if you can get cash for sale or not. The Bank of America cooperative short sale or the Bank of America HIN Incentive programs are considered the most famous cash for short sale programs. There may be sellers who could qualify for both types of Bank of America programs and get paid.
Types of Short Sale Programs by Jonathan Katz