Renaissance Realty Group’s Blog: Eric Reid (Renaissance Realty Group )

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By Jeff Lischer

Initially announced on May 14, 2009 , with guidance and standard forms issued on November 30, 2009, the program will help owners (referred to below as borrowers) who are unable to retain their home under the Home Affordable Modification Program (HAMP). A borrower (the current owner) may be able to avoid a foreclosure by completing a short sale or a deed-in-lieu of foreclosure (DIL) under HAFA. The guidance and forms released on November 30 do not apply to loans owned or guaranteed by Fannie Mae or Freddie Mac. Those enterprises will issue their own HAFA guidance and forms.

What is HAFA?

 Who is eligible for HAFA?
The borrower must meet the basic eligibility criteria for HAMP:

· Principal residence.

· First lien originated before 2009.

· Mortgage delinquent or default is reasonably foreseeable.

· Unpaid principal balance no more than $729,750 (higher limits for 2 to 4 unit dwellings).

• Borrower's total monthly payment exceeds 31% of gross income

Home Affordable Foreclosure Alternatives Program (HAFA), which will help homeowners who are unable to retain their home under the Home Affordable Modification Program (HAMP). Under HAFA, a borrower (the current owner) may be able to avoid foreclosure by completing a short sale or a deed-in-lieu of foreclosure (DIL).

HAFA is designed to simplify and streamline the use of short sales and deeds-in-lieu of foreclosure by improving the process. Specifically, HAFA will:

HAFA - WHAT DOES IT MEAN AND WHY DO i CARE ?

Home Affordable Foreclosure Alternatives Program (HAFA)

HAFA is a complex program, with 43 pages of guidelines and forms, designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure. HAFA is part of the Home Affordable Modification Program (HAMP), providing incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program.

These guidelines go into effect April 2010!

FHA Defaults hit 9% 

The latest numbers from the Federal Housing Administration (FHA) show that the percentage of loans it backs that are at least 90 days past due hit 9.12% at the end of 2009. That figure is up from 6.82% one year earlier - a 34% increase.  FHA officials have repeatedly cited a rise in loan defaults as inevitable given the agency's exponential growth in market share. The FHA currently backs about 30 percent of all new loans for home purchases and 20 percent of refinanced loans. Those figures represent an increase of nearly 1,000 percent since 2006, when private lenders began to pull back and the credit crunch set in.  According to the agency, the bulk of its problem loans stem from originations made in 2007 and 2008. 

 Officials say tighter underwriting standards make more recent and new loans less likely to default. In fact, HUD said in its fiscal year 2011 budget that it expects new business from FHA to generate a $6 billion overall profit, although that number will be eclipsed by projected losses of $19 billion from insuring soured loans.  In the fourth quarter of 2009, lenders originated $86.1 billion in FHA single-family loans, up 21 percent compared to the same period in 2008. Sixty percent, or $51.8 billion, of the fourth-quarter financing was used to fund home purchases.  For the full 2009 year, FHA insured 5.8 million loans, with an aggregate balance of $752.6 billion - a 24 percent increase compared to 2008's business.

MBA - mortgage applications down

The Mortgage Bankers Association (MBA) said rates on 30-year fixed-rate mortgages, the most widely used loan, fell below 5 percent for the first time since the week ended Dec. 18, but U.S. mortgage applications dipped last week.  The MBA's Weekly Mortgage Applications Survey for the week ending February 5 decreased 1.2 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 0.6 percent compared with the previous week.  The Refinance Index increased 1.4 percent from the previous week and the seasonally adjusted Purchase Index decreased 7.0 percent from one week earlier.  The unadjusted Purchase Index decreased 1.1 percent compared with the previous week and was 7.5 percent lower than the same week one year ago.  The four week moving average for the seasonally adjusted Market Index is up 3.8 percent.  The four week moving average is up 0.8 percent for the seasonally adjusted Purchase Index, while this average is up 4.8 percent  for the Refinance Index.  The refinance share of mortgage activity increased to 69.7 percent of total applications from 69.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 4.5 percent of total applications from the previous week.

Home prices in January increased 2.3%, marking the first year-over-year increase in more than three years, according to the Home Data Index (HDI) from Clear Capital, the real estate data provider. In all, prices gained 1.8% on the rolling-quarterly scale into January.  All regions but the Northeast, which posted a 1% drop, saw increases over the previous three months. Prices in the Midwest increased 5%. The South had a 1.5% rise in prices, and the West had a 1.3% increase.  Alex Villacorta, senior statistician at Clear Capital, said that the year-over-year price gain is good to see despite near record high real-estate owned (REO) saturation rates. That rate declined 0.7 percentage points to 24.8% in January, but, according to the report, regions with the highest level of REO have had steeper recoveries.  "Recovery of home prices has generally been more notable in the regions with the highest level of REO saturation," according to the report.  The trend is most apparent wi  th higher levels of REO saturation seen in the West, 35.4%, and the Midwest, 28.4%.  "The sustainability of current price gains will be challenged in 2010, given that most lenders and analysts predict a significantly larger number of REOs will reach the markets. Further, this suggests that as the dynamics of supply and demand evolve, different markets will have varied responses to increased REO activity," Villacorta said.