Short Sales and HAFA Eligibility


Some of you working short sales might be surprised when your borrower receives a letter from the servicing company stating that the borrower is ineligible for a HAFA short sale.  You probably did not even have HAFA in mind when you requested approval of a short sale offer! Many such letters fail to explain that the borrower is still being evaluated for traditional short sale requirements of the particular servicer or loan investor.  Just because the borrower is HAFA-ineligible, does not mean the short sale is being turned down.

Tell your property owners not to panic!  The letter is a result of federal directives that all homeowners be considered for HAFA whenever the servicing company receives a short sale or deed-in-lieu request.  Even if the property is not the borrower’s principal residence, they will still receive a HAFA letter if the collateral is a residential property.  It doesn’t mean they MIGHT have been eligible for a HAFA modification or short sale, it just means the servicer decided “better safe than sorry” and it’s better to send out too many letters rather than not enough letters.

If the servicer determines that the borrower IS in fact HAFA eligible, the servicer must send a notice to the borrower and allow them fourteen days within which to request a loan modification rather than a short sale.  Often, your homeowner will not tell you they received such a notice.  You must tell them in advance to expect this, and to advise you when they receive the letter.

If your homeowner receives such a letter, you should immediately call whatever central phone number you have for the servicing company. You do not need to call the negotiator.  Ask whoever answers the phone to access the loan file and read the notes in the file. If there is NOT a note saying the short sale has been denied, then your offer is still being considered.

If the letter says the homeowner IS HAFA-eligible, then they have fourteen days within which to request a loan modification rather than a short sale. If the homeowner does nothing during that time period, then the 14 days will run out and someone at the servicing company will again turn their attention to the short sale request.  In other words, if your homeowner still wishes to do a short sale, fourteen extra days will be added to the time it takes to approve a short sale.  To speed things up, the homeowner should immediately write back and say they are not interested in a loan modification. Of course, if your homeowner thinks a modification would help save their home, then of course they should take advantage of the opportunity.  It would be unethical of you to advise otherwise, especially if you are the listing agent.