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HAFA Short Sales Pick Up Slightly After Rules Eased

By Jon Prior

Mortgage servicers completed slightly more short sales under a government-funded program over the last two months after the Treasury Department relaxed rules at the start of the year.

Under the Home Affordable Foreclosure Alternatives program, servicers completed 6,069 short sales and deeds-in-lieu of foreclosure in June. The total equaled roughly 100 more than May and up from less than 4,500 in each of the first four months of the year, according to Treasury data released Friday.

Treasury relaxed some rules in January to expand the program, which launched more than two years ago. Beginning in February, servicers are no longer required to verify a borrower's financial information or if the monthly mortgage payment exceeded 31% of income.

"We remain committed to utilizing the tools we have available to help our country heal faster from an unprecedented crisis," Treasury Assistant Secretary Tim Massad said in a statement.

But the program, like its larger Home Affordable Modification Program umbrella, will fall far short of original estimates.

Through June, the Treasury spent $237.2 million under HAFA for the nearly 53,000 short sales and deeds-in-lieu of foreclosure, according to the Special Inspector General for the Troubled Asset Relief Program.

More than $140.9 million of the money went to borrowers for relocation expenses, while $70.5 million went to servicers and another $25.8 million reimbursed investors.

Investor uptake of the program varied greatly.

Less than 3,800 of the completed HAFA short sales went for loans owned by Fannie Mae and Freddie Mac.

But since HAFA launched in 2010, the GSEs completed more than 250,000 short sales through their own programs, according to Federal Housing Finance Agency data.

Two-thirds of HAFA activity occurred on loans securitized in the private mortgage bonds.

Of the deals completed, only 1,500 were deeds-in-lieu of foreclosure. Under HAFA rules, a borrower must make a good faith effort to list and market the property before the servicer can offer a payment. The Treasury allows borrowers to receive at least $3,000 in relocation costs.

Short sales in general are becoming easier and quicker to accomplish. New requirements under the $25 billion foreclosure settlement with the largest servicers installed new timelines.

Short sales hit a three-year high nationally in the first quarter, increasing 25% from the year before, according to RealtyTrac.

Nearly two-thirds of all HAFA deals occurred in California (42%), Florida (16%) and Arizona (7%), according to the Treasury.

Of the nearly 80,000 HAFA offers, one in five began as a HAMP modification, which the borrower either requested to cancel or was disqualified.

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