Good news: The highly regarded S&P Case Shiller home price index showed its first monthly increase in 7 months. Home prices rose 1.3% in April.  On a yearly basis, home prices fell, but the decline was smaller than in previous months.

Bad news:  There are still more than 10 million properties (Zillow estimates that the real number is 16,000,000) with underwater mortgages, and a shadow inventory of 1.5 million, or four months supply.  Negative equity will continue to take its toll on consumption, while the shadow inventory, worth about $246 billion according to CoreLogic, will constrict lending.

Out of those 10-16,000,000 mortgages that are underwater, about 3-6 million remain “severely underwater,” which means the initial loan-to-value ratio (LTV) is 125% or more (in other words, the value of the mortgage is at least 25% higher than that of the property).  While seriously delinquent mortgages (at least 60 days) have declined, the percentage of loans in foreclosure has remained stubbornly high, at about 10% of underwater mortgages. Borrowers with high negative equity are also many times more likely to default.

Key enhancements include:

• Time frame extended: The program has been extended to Dec. 31, 2013. The HAFA short sale or deed in lieu of foreclosure can be initiated up to Dec. 31, 2013; however, the transaction must have a closing date on or before Sept. 30, 2014.
• Eligibility updated: Occupancy requirements for HAFA eligibility have been removed; however, the property can’t be owned or secured by a business entity.
• The second lien maximum has been increased from $6,000 to $8,500. 
• HAFA relocation assistance of $3,000 will be paid only to the primary resident (borrower or occupant) of the property at time the agreement is executed. The resident must vacate upon closing. Vacant properties are not eligible for HAFA relocation assistance.
  • Nonborrowers (tenant, legal dependent, parent or grandparent) can now qualify if occupying the property and must vacate upon closing.

Additional information: 

•  This policy is effective June 1, 2012, for new HAFA-eligible short sales initiated. It also applies to current HAFA short sales prior to closing.
• Tenants will be eligible only for the $3,000. Any money available from additional incentive payout opportunities must be paid to the borrower. The HUD-1 must reflect the breakdown.
• The borrower will be responsible for requesting and managing the tenant relocation assistance, including submitting required proof of occupancy and other documentation.

Additional recommendations:

• Help your financially distressed clients understand the benefits a HAFA short sale, including the relocation incentive. Review the agent HAFA education guide to learn more.
• Provide the Bank of America non-GSE HAFA Eligibility FAQ to interested homeowners.
• Direct homeowners to contact Customer Care at1.866.880.1232 if they have questions.

The Independent Foreclosure Review will determine whether individual borrowers suffered financial injury and should receive compensation or other remedy because of errors or other problems during their home foreclosure process.

If you believe you are eligible to participate in the program, you may complete and submit a Request for Review Form. It is important that you complete the form to the best of your ability; all information you provide can be useful.

All Requests for Review Forms must be submitted online or postmarked no later than July 31, 2012.

Request to have your foreclosure reviewed before its too late:

independentforeclosurereview.com/