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Federal program for short sellers goes largely unused

Premium content from Phoenix Business Journal – by Jan Buchholz

As many homeowners frantically try to sell their homes through short sales, few of them know about a government program that could expedite that process and pay them up to $3,000 for relocation expenses.

The Home Affordable Foreclosure Al­ternatives program was approved in 2009 to complement the Obama administration’s Home Affordable Modification Program, or HAMP. The thought was, home­owners who worked out modifications with lenders but still couldn’t afford their payments could take advantage of HAFA to get a few thousand dollars for short-selling their homes.

According to the Oct. 27 issue of national newsletter Housing Wire, only 342 HAFA sales had closed nationwide in 2010 as of Sept. 30, and about 117,000 were in progress as of Oct. 27. Considering HAFA went into effect April 5, those modest numbers are breeding discontent among many local agents.

Jim Hogan, owner of the Hogan School of Real Estate in Tucson, understands their annoyance. He taught the ins and outs of the complicated HAFA program at the National Association of Realtors’ national convention in New Orleans in early November.

“I know there’s frustration among agents because the servicers are not up to speed,” Hogan said. “Plus, real estate agents don’t fully understand the program.”

Hogan believes no more than 700 agents have been trained in the HAFA program through his classes in Arizona. It’s a small percentage of the 42,000 Realtors licensed in the state.

“Next year, the first six to eight …

As many homeowners frantically try to sell their homes through short sales, few of them know about a government program that could expedite that process and pay them up to $3,000 for relocation expenses.

The Home Affordable Foreclosure Al­ternatives program was approved in 2009 to complement the Obama administration’s Home Affordable Modification Program, or HAMP. The thought was, home­owners who worked out modifications with lenders but still couldn’t afford their payments could take advantage of HAFA to get a few thousand dollars for short-selling their homes.

According to the Oct. 27 issue of national newsletter Housing Wire, only 342 HAFA sales had closed nationwide in 2010 as of Sept. 30, and about 117,000 were in progress as of Oct. 27. Considering HAFA went into effect April 5, those modest numbers are breeding discontent among many local agents.

Jim Hogan, owner of the Hogan School of Real Estate in Tucson, understands their annoyance. He taught the ins and outs of the complicated HAFA program at the National Association of Realtors’ national convention in New Orleans in early November.

“I know there’s frustration among agents because the servicers are not up to speed,” Hogan said. “Plus, real estate agents don’t fully understand the program.”

Hogan believes no more than 700 agents have been trained in the HAFA program through his classes in Arizona. It’s a small percentage of the 42,000 Realtors licensed in the state.

“Next year, the first six to eight months will tell,” Hogan said of the prospects for HAFA’s success.

In a nutshell, HAFA is designed to provide relief to home­owners who would qualify for HAMP, but loan modifications are insufficient to keep them from defaulting. HAFA provides financial incentives including up to $3,000 for the seller to move, $1,500 for processing and administrative costs, and up to $6,000 for subordinate lienholders, depending on restrictions. The money is provided through the federal government’s Troubled Asset Relief Program.

HAFA expedites the process first by using information collected for the modification program and then by setting specific time frames for accomplishing milestones in the HAFA sale. Once a short-sale offer is made, the lender has just 10 days to accept or reject it.

“It’s a hybrid short sale,” said Curtis Hall, an associate broker at Re/Max Achievers in Chandler, who taught a HAFA class to several dozen agents at a recent workshop sponsored by the Arizona Regional Multiple Listing Service.

Like Hogan, Hall believes the next few months will reveal whether the program works better and more efficiently than other distressed property options. Since short sales and lender-owned foreclosure sales accounted for 66 percent of the sales activity in Arizona from September 2009 to September 2010, it’s essential that brokers learn how to do HAFA sales, he said.

Conventional sales, Hall said, will continue to be the exception.

One real estate professional said, “Realtors will starve if they don’t know how to do HAFA sales.”

Although the process is expedited, that doesn’t mean it’s easy.

Neither JPMorgan Chase & Co. nor Wells Fargo was able to provide specific statistics on HAFA activity.

“It’s complicated,” said Wells Fargo spokesman Tom Goyda.

Chase spokeswoman MaryJane Rogers said she spoke with a “few national folks, (but) I’m not able to find much to discuss with regard to HAFA.”

Bank of America representatives did not respond when asked to comment.

Gerri Bara, an agent with John Hall & Associates in Tempe, said she’s not entirely encouraged by what she is learning about HAFA.

“My primary concern based on what I am learning is that there appear to be so many requirements, and they are deal-breakers,” Bara said. “So much effort, so much paperwork, so much time to go through the process — just to find out at the end of the maze that there is no door that quite fits your situation.”

Jean Batson, an agent with Realty Executives, said she’s hesitant to handle a HAFA sale.

“Will I try a short sale via HAFA on my own the first time out? Probably not,” said Batson. “I’d be more comfortable pairing up or co-listing with someone who has traveled the minefield of short sales numerous times before. Any short sale is challenging.”

There is a chance the government will try to streamline the process further, according to Hogan.

“The Treasury (Department) has stated in conversations that they expect to tweak HAFA in the next few weeks,” he said.

Ultimately, Hall said, every agent, seller and buyer needs to be advised by an attorney who knows the potential pitfalls of short sales.