A federal program designed to help owners losing their homes – those owners who cannot hold onto their property even with existing federal aid – also impacts allowable commissions for Realtors and a licensee’s ability to offer commission rebates to buyers and sellers.
The U.S. Treasury Department’s Home Affordable Modification Program (HAMP) was designed to help owners stay in homes by lowering principal, lowering interest rates and/or extending the payment period. However, some homeowners still don’t have the ability to hold onto their property under HAMP, and will inevitably lose their homes, either through foreclosure or deed-in-lieu of foreclosure (homeowners voluntarily cede ownership to the lender by mailing in their keys). To help these owners, the Home Affordable Foreclosure Alternatives (HAFA) was created.
HAFA created a standardized process for short sales. It benefits real estate licensees, homeowners and lenders in some ways – including a faster short sale process – but it also creates rules that impact some real estate company policies. If dealing with HAFA short sales, however, buyers, sellers and real estate licensees must accept the terms.
For licensees, a contract that does not follow the law could be illegal; more importantly, however, a contract that does not adhere to the terms of HAFA won’t be accepted by a lender, further bogging down the slow short sale process even more and further frustrating buyers and sellers.
HAFA does not impact all short sales. Created to help only the most needy homeowners, the rules apply only under the following conditions:
• The property must be the borrower’s principal residence.
• The loan was originated on or before Jan. 1, 2009.
• The loan is delinquent or a default is reasonably foreseeable.
• The unpaid balance on the mortgage is less than $729,750 (higher for two-to-four unit properties).
• The total monthly mortgage payment exceeds 31 percent of a borrower’s gross income.
For properties that qualify under HAFA rules, real estate licensees and brokers must adhere to the following limitations:
• There can be no agreements to share any portion of a commission after the deal closes to the buyer or seller. This negates any form of commission rebate offered by some licensees.
• The transaction must be “arm’s length,” meaning the buyer, seller and Realtor cannot have a personal or familial relationship.
• A real estate licensee cannot earn a commission through the sale of his or her own house.
• A buyer must agree to not resell the home within 90 calendar days.
• A seller cannot have any expectation of buying or renting the property back after the sale.
HAFA also offers positive changes for real estate licensees. A prime complaint in the past focused on commission changes. Since lenders were not a party to the original contract between buyer and seller, they were free to change the commission percentage as they negotiated a short sale rate.
Under HAFA, lenders cannot reduce a commission if it is 6 percent or less. It also offers other benefits such as pre-approved short sale terms before listing. For sellers, a HAFA sale fully releases them from future liability for the first mortgage debt. The program also offers financial incentives to some participants.
HAFA becomes effective April 5, 2010, but servicers may implement HAFA earlier, providing the servicer is able to collect and report all required information described in the reporting requirements. Borrowers may be accepted into HAFA if the short sale agreement is fully executed by the borrower and received by the servicer on or before Dec. 31, 2012.
For more information on HAFA rules, visit the National Association of Realtors’ website at: http://www.realtor.org/realtors/basics_short_sales?wt.mc_id=rd0041.
© 2010 Florida Realtors®
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