A new California law will further protect homeowners pursuing short sales by barring first and second lien holders from going after sellers for money owed after the short sales close.
Gov. Jerry Brown signed Senate Bill 458, authored by Senate Majority Leader Ellen Corbett (D-San Leandro,) into law on Friday July 15, 2011
Click on the California State Seal for a full detail on the bill
For a list of available short sales in Santa Barbara County click below:
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Short Sales and HAFA Facts
What is a short sale?
A short sale is a commonly used alternative to a foreclosure. If you can no longer afford to make your mortgage payments and your home is worth less than you owe, a short sale may allow you to sell your home to pay your mortgage. In a short sale, the lender agrees to accept an amount less than what is actually owed on the loan based on a showing of financial hardship.
If the unpaid balance of a loan is, say, $700,000 and a property sells for $500,000, under a short sale the lender might accept $500,000 as payment in full. Not all lenders will accept short sales or discounted payoffs, especially if it is in their interest financially to foreclose; and, not all sellers nor all properties qualify for a short sale.
Please remember, I am a real estate broker and not licensed as a lawyer nor a CPA and cannot advise on any financial consequences. Except for certain conditions pursuant to the Mortgage Forgiveness Debt Relief Act of 2007, you need to know that the I.R.S. could consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. You should always consult your CPA and an attorney if you have questions about any lingering financial responsibility.
Most Common Short Sale Questions:
I owe the bank more than my home is worth. Now what?
What is a short sale? Will it affect my credit?
What will it cost me to do a short sale?
Can I do a short sale if my lender has already filed a Notice of Default?
Home Affordability Foreclosure Alternative Program / HAFA
HAFA - Overview
HAFA is an acronym for Home Affordable Foreclosure Alternatives, a government-sponsored program that helps individuals and families who are experiencing difficulty in selling their homes. In conjunction with the Home Affordable Modification Program (HAMP), HAFA was initiated on November 30, 2009 by the U.S. Treasury Department under the Obama Administration with the goal of revitalizing the housing market.
Via the program, borrowers are provided incentives that will help them take advantage of either a short sale, where the borrower and the mortgage servicer agree to sell the home for less than the value of the loan; or a deed-in-lieu of foreclosure, where the homeowner voluntarily gives the deed of the property to the servicer.
HAFA complements HAMP as an alternative for eligible borrowers, but does not apply to loans that are affiliated with Fannie Mae or Freddie Mac. Reportedly, these organizations have plans to release their own versions of HAFA in the near future.
In simpler terms, HAFA helps people quickly sell their homes by giving them pre-approved short sales terms before listing the property. They are fully released from future liability for the first mortgage debt, and can receive $1,500 for borrower relocation assistance. Investors and servicers can also receive financial assistance through the program for administrative costs, processing fees, etc. The program sounds simple, but is actually quite complex with many guidelines and rules.
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