This week the US Treasury Department released it’s long awaited new short sale rules and forms.  The new program is called HAFA (Home Affordable Foreclosure Alternatives) and sets forth new government policies for a short sale or deed-in-lieu of foreclosure. It is the new rules and procedures for HAMP participating lenders and servicers to follow when a homeowner doesn’t qualify for a loan modification under HAMP’s rules, who are not able to keep their loan modification current or who request a short sale or deed-in-lieu.

The new guidelines and accompanying forms are contained in a 43 page servicing directive sent to lender and servicers this week.  It pretty closely follows the terms the Treasury Department announced earlier this year but adds specific forms including (1) a form instruction letter to homeowners;  (2) a short sale agreement between the borrower and servicer;  (3) a request for approval of short sale (which includes a very simplified HUD 1 and an automatic $1,500 relocation allowance for the borrower); (4) short sale approval and disapproval forms (so the borrower will know why their short sale was rejected; (5) several DIL forms and;  (6) a checklist for the servicer to follow.

These rules will be the rules for a vast majority of short sales in the future.  This is because they will be mandatory for all servicers who particiapate in the HAMP program which includes almost all the major servicers in the country and all FreddieMac, FannieMae, VA and HUD owned or insured loans.  The time table for servicers to implement the new rules is anytime between now and April 5, 2010.  However, due to the complexity of the new program, do not expect any servicers to implement the new guidlelines between now and the end of this year.

To make sure all our members understand the new program, we will be announcing a new webinar shortly to go over the new program and forms in detail.  In the mean time platinum members can find the entire 43 page program posted in the members’ section in the Short Sale category under Resources.

Tags: deed-in-lieu, HAFA, HAMP, Home Affordable Foreclosure Alternatives, loan modification, new short sale rules, short sale, short sale agreement, short sale forms, Treasury Department