Category Archives: foreclosures-shortsales

Strategic Default in Illinois: Q&A

foreclosures-shortsales, Strategic Default, Uncategorized

One client had no problem deciding to strategically default on his Chicago condo due to a triple-witching hour of crime, an abandoned condo complex and a declining market that left the unit worth one-third what he originally paid. For most people, though, the decision to walk away from a property is not easy. Here are some common questions about the process:

What will happen to my credit score and when will I be able to buy another house?

Your FICO score will drop to about 520 when you miss about three mortgage payments. You can get an FHA mortgage with a score of about 650 and over 720 is considered “good” credit. How quickly you rehab your credit is up to you. It will take a minimum of two years to be able to get another mortgage and it may take as long as five years.

Do I apply for a loan modification first?

You can certainly try to apply for a loan modification under HAMP. It is unlikely that your loan modification will be approved and I pretty much consider it a waste time. Some say that HAMP is basically dead, a failed program. Loan modifications are for people who want to stay in their homes.

Should I try a short sale first?

Some owners try a short sale first. Most short sellers are behind on the payments already and are near or in foreclosure. If the property is an investment property, you absolutely should try a short sale first because it will lessen the tax impact.  Many owners can’t stand the thought of the many delays inherit in a short sale.  I think it is smart to at least try a short sale first in most cases.

Once I quit paying the mortgage, when will a foreclosure be filed?

Usually, the foreclosure case is filed about 4 months after the first payment is missed.

Do I have to accept the summons and will they serve me at work?

For the owner, the day the sheriff serves the summons and complaint is a very dark one. The abstract becomes real and owners get very upset by this. A plain-clothes officer will ring the doorbell and ask if you are you. Then the officer hands you the summons and complaint and walks away. Generally, the sheriff will try to serve the summons for about two weeks and then they quit trying. After they quit trying to serve you personally, they will serve you by publication (meaning a notice is published in a legal newspaper). Owners are not supposed to evade service of process by refusing to answer the door (many do). In general, most process servers don’t try very hard to serve the summons. I find that lenders usually will NOT try to serve you with the summons at your work.

Do I have to respond to the complaint and file an appearance after the sheriff serves me?

In most cases, it is not necessary to file an “appearance” with the court or to appear in court. In fact, filing an appearance submits you to the court’s jurisdiction and will allow the lender to get a deficiency judgment against you. Ninety percent or more of foreclosure cases are “default judgments” where the defendant does not appear.

Do I have to go to court?

For some reason, owners want to go to court to explain the case to the judge. This is not necessary and not productive. The judge is overwhelmed with cases. There is no reason to go to court in 99% of strategic default foreclosures.

How long can I stay in the home without paying?

In most cases, an owner can stay in the house without making payments for one year from service of summons. It can be as short as ten months or as long as two years, but one year is about average.

When do I have to hand over the keys?

Some lenders actually call you early in the process to “make arrangements to pick up the keys.” This amazes me, since they have no authority to ask for or to take the keys. They are hoping that you will just turn the keys over. Generally, possession is given to the lender after the sheriff’s sale is confirmed by the court. This takes about one year from the time you are served with the summons. Most owners leave much earlier in the process because they find it too hard to continue to live in the house. You will have to leave the house once the order of possession is entered. If you don’t leave then the lender can file the order with the sheriff and have you evicted, which is a very unpleasant thing that I would not wish on anyone.

Do I have to keep paying the homeowner’s insurance and taxes?

If you are still living in the house, you should keep the homeowner’s insurance in effect since it covers all of your personal property. Once you leave the house, there is no reason to continue paying for homeowner’s insurance. Most owners stop paying the real estate taxes (if there is no escrow) once they stop paying the mortgage. It takes about three years to lose a home for unpaid real estate taxes.

Do I have to pay for utilities?

Yes, all utilities are personal bills and the utility will file suit against you if you don’t pay.

Does it matter if I am served personally or by publication?

Yes, if you are served personally the lender can get a deficiency judgment against you. If you are served by publication, the lender can’t get a deficiency judgment. For more about deficiency judgments, see here.

Does it make any difference if I own a condo?

Yes, it does. If you are planning a strategic default on a condo, the condo association will file a separate lawsuit against you for the unpaid condo dues. So you may have to settle that case or continue to pay the dues until the condo foreclosure is final.

Can the lender sue me for deficiency judgment?

Most foreclosure complaints ask for deficiency judgments. This means that if the lender sells the property at the sheriff’s sale for less than you owe, the lender can try to collect this deficiency from you. Most lenders in Illinois are not seeking deficiency judgments. More information on deficiency judgments is here.  The lender can get a deficiency judgment against you AND 1099 you for the forgiveness of debt, but this is pretty rare.  Most lenders 1099 you for the forgiveness of debt and leave it at that.  However, if you have a second mortgage it is possible that the lender will file a collection case against you. In my opinion, this is a much greater threat than  a deficiency judgment.

Will the lender take my other assets or file a wage garnishment after the foreclosure?

Yes, they could, but it’s rare. If a lender gets a deficiency judgment, the lender could garnish your wages or try to take other property from you. The lender cannot take IRAs, 401ks or life insurance. I have never seen this happen.

Will I get a 1099 after the foreclosure?

Yes, lenders are required to send a 1099 for forgiveness of debt after a foreclosure. Read more about the 1099 issue here. If the property foreclosed was your primary residence then you file form 982 and this makes the income from the 1099 nontaxable.

Will I get 1099’d if I walk away from an investment property?

If the property was an investment property, then you will get 1099’d. Unfortunately, you have to claim the 1099 as income, unless you filed bankruptcy BEFORE the 1099 was issued or unless you can show you are insolvent. Walking away from an investment property has severe tax consequences and you should do everything possible to avoid doing so.

Will I need to file for bankruptcy?

Most likely you will not need to file bankruptcy. Generally, you file a chapter 13 bankruptcy to keep your house, not after a strategic default. You file a chapter 7 bankruptcy to get rid of credit card debt and other personal bills. The only reason to file bankruptcy after a strategic default would be in the unlikely event that the lender got a deficiency judgment against you, if a second mortgage holder filed a collection action against you or if you defaulted on an investment property. The chapter 7 bankruptcy would be needed after a strategic default on an investment property, and the case must be filed prior to a 1099 being issued for forgiveness of debt. Filing bankruptcy after a 1099 is issued will not work.  A chapter 13 bankruptcy can be useful if a homeowner has a high income or other assets that he or she wants to protect. The homeowner files the chapter 13, “surrenders” the home in full satisfaction of the debt and gets rid of any deficiency judgment and tax consequences that way. There will be some payments that have to be made to the bankruptcy trustee but those depend on income, assets and other debts.

Strategic Default in Illinois – Last man out of a dead condo complex

foreclosures-shortsales, Strategic Default

I get many calls and emails from my blog, mostly from people near or in foreclosure.

This week, I spoke with a guy who bought a condo in the city in 2006 (generally considered the market peak). Then, and now, he had a good job, but the Chicago neighborhood where he lives is overrun with foreclosures. The neighborhood  was “up and coming”  in 2006, but now it’s downright dangerous, he said.

In fact, he is now the only owner left in the 4-unit condo building, the other three owners having been foreclosed upon and the units standing vacant with no offers.

His mortgage amount: $275,000.00.  He was current in the mortgage payments. The biggest problem (among several) was that the other foreclosed units in the building were now on the market for $99,000.00! His unit was hopelessly “underwater” and it might take three lifetimes for him to get back to the price he paid in 2006.

We talked about the options and he admitted that he already decided on a “strategic default.”  A strategic default is when an owner quits paying on a mortgage when he or she otherwise could afford to pay and just walks away. Most of the questions I get now are from people considering, or in, strategic defaults.

He decided to quit paying the mortgage in June  and was going to move out right away, due to the unsafe neighborhood.  What are the consequences of walking away from this unit?

  1. Since this was his primary residence, the main effect of his coming default will be that his credit will drop to about 520 (FICO) and he will not be able to get another mortgage for at least two years (probably more like 5 years or longer).
  2. He will get a 1099 for the forgiveness of debt from the lender after the foreclosure, but since it is his primary residence there will be no tax due.
  3. We discussed that there is the possibility of the lender getting a deficiency judgment, but it was not likely. Illinois allows deficiency judgments, but few lenders are pursuing them. Most just issue 1099s and leave it at that.
  4. Walking away from a condo can be problematic because the condo association will file suit against you for the unpaid assessments (and will tack on their attorney’s fees). But, in this case, there was no condo association left to pursue him, so that was not an issue.

Strategic defaults are everywhere now (just take a look at the 400 plus comments in this WSJ story on Strategic Default). There are forums online for homeowners to discuss with each other the many aspects of a foreclosure.

I am especially surprised at the number of senior citizens considering strategic defaults. Many seniors on tight incomes maxed out home equity lines and are walking away from their homes (to rent) because market values dropped like a stone (but that’s another story).

In the next few posts, we will take a look at what homeowners in Illinois have to consider before going down the strategic default path? I am not encouraging strategic defaults and I think that this should be done as a last resort.

There is a debate on the morality of strategic defaults. Some say that strategic defaults are immoral and will drag down our system. I agree with Professor Brent White that in some cases a strategic default is not only morally acceptable, but the right thing to do.

Next: Q&A on Strategic Default in Illinois.

Is HAMP loan modification program dying?

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This is a well-written post on HAMP, the loan modification program. It talks about how HAMP appears to be dying due to “strategic defaults” (a person whose home is worth less than the mortgage just quits paying, without trying to sell it or modify the loan) and an overly complicated approval process.  Fewer and fewer people are making application for loan modifications and of those who do apply, many are shot down for lack of income.

Will HAFA help speed up short sales?

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It remains to be seem if the new HAFA program for short sales, which started April 5, 2010, will speed up short sales. Short sales were already speeding up a little on their own because lenders finally seemed to realize that with home prices nosediving, out of sheer self-interest, it was best to be less rigid on the prices they accept for a short sale.

Some key points of the new HAFA short sale program:

1. Bad: The short sale seller must first apply for a loan modification under HAMP (that alone may stop many owners from using the new program).

2. Good: If approved for a HAFA short sale, there can be no deficiency claim against the seller.

My prediction is that the HAFA program will do little to speed up short sales due to the fact that short sale sellers will not want to march through the HAMP loan modification swamp first.

Short sales improving

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In the last few weeks, short sales seem to be easing up a bit, meaning that some are actually closing.

It seems that lenders are finally understanding that with prices in a free-fall, it’s better to allow a short sale than to let a property go through foreclosure.

The new short sales rules will begin next month. The greatest promise of the new short sale rules is that the lender will order its broker price opinion (BPO) before a contract is obtained by the seller and will actually tell the seller how much it wants to net from the short sale. While this sounds minor, it is huge. In the past, lenders would play a guessing game and would refuse to disclose how much they wanted to net from the short sale.

This WSJ article suggests that clients wait to list short sales until the new rules hit. I would say go ahead and try to list it now. Don’t wait.

Last week I closed a short sale.  My client had three prior contracts fall through. Buyers signed contracts, waited 45 days, and then jumped ship quickly.  All short sale buyers  say that they will be patient, but in reality they are as nervous as alley cats. On the fourth contract, we finally closed.  It took 7 months total. The lender did not ask for a note or cash payment from my client.  It was a deficiency short sale, meaning the lender could pursue my client after closing for the shortage, but my client was willing to accept that risk.

One less quirk to buying a Fannie Mae foreclosure

foreclosures-shortsales, Real Estate-Purchases
Last fall, I whined about how hard it was to buy a foreclosed property from Fannie Mae. It’s still true that Fannie Mae is a tough seller and a pain to buy from.  (I have a Fannie Mae purchase now.  It’s been weeks, but there is no signed contract. Unfortunately, that’s “normal”… )
Now I have one less thing to complain about: Fannie Mae (in its infamous and incomprehensible “Addendum”) now agrees to will dewinterize the property after the contract is signed so that the buyer can inspect the property with all the utilities running. This is not exactly a breakthrough at the Paris Peace Talks or anything, but it sure helps.
Previously, the poor buyer had to have a plumber on hand when the property was dewinterized and, more often than not, leaks sprang from every corner of the house. It was a major misadventure just to get the utilities turned on to do an inspection.
Fannie Mae owns more than 50% of all mortgages and there are many foreclosed Fannie Mae homes on the market. This should make it a little easier for buyers to complete Fannie Mae buys without added aggravation.
Here’s the new clause for your reading pleasure:

Investment property: When to file bankruptcy in a short sale or foreclosure

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Short sales and foreclosures of investment properties are tricky.

Timing is everything. Bankruptcy can be used to discharge the tax issues arising from a foreclosure or short sale, but the window of opportunity slams shut once the lender issues a 1099.

In August 2009, I closed a short sale for a client. Like most short sales, it took forever (about 9 months), but unlike most attempted short sales, this actually closed.

My client bought the townhouse as an investment, not as his residence, in 2005 with the intention of “flipping” it. Well, the real estate market plunged, and not only did he not flip the property, but he couldn’t rent it out either. He somehow stayed current on the payments, listed the property for sale as a short sale and found a buyer.

My client had to pay extra cash to the lender for a “no deficiency” short sale payoff. Even with the amount my client paid, the mortgage payoff to the lender was “short” by $60,000.00.

There are lingering problems with any short sale of investment property. The main tax problem is this:  Even though the short sale payoff was a no deficiency payoff, meaning the lender could not pursue him for the $60,000.00 after closing, the lender issued a 1099C last week to the client for $60,000.00.

Lenders are required by law to issue 1099s by the first week of February in the year after any debt of $600.00 or more is forgiven or written off. There is no way to avoid the 1099. But there are ways to respond to the issuance of a 1099 after a short sale or foreclosure:

1. First, if the property was your primary residence, Form 982 can be filed with the client’s tax return. Under the Mortgage Debt Relief Act of 2007, this amount is excluded from income if the client used the property as a primary residence. In most cases, a short sale or foreclosure of a primary residence will not require a client to file bankruptcy because the income is excluded already and deficiency judgments are rare.

2. Second, if the property is not your primary residence, you can file Form 982 and claim to be “insolvent.” If you are insolvent, meaning your debts exceed assets, then the 1099 income vanishes. You have to include IRAs and retirement accounts as an asset in calculating insolvency, but IRAs and retirement accounts are exempt in bankruptcy, and the client keeps them. In my client’s case, he did claim to be insolvent, which excluded the $60,000.00 from the 1099 from his income.

3. Third, if the property was not your primary residence and you are not insolvent, the client can file a chapter 7 bankruptcy to discharge the debt. But, the bankruptcy must be filed before the 1099 is issued by the lender. Once the 1099 is issued, the forgiven debt turns into income and income cannot be discharged in a bankruptcy. So my client had a window of opportunity to clear the 1099 debt from August 2009 through January 2010 by filing bankruptcy. Filing bankruptcy at any time during that period would get rid of all personal liability for the mortgage, including the 1099 afterward.

I still believe that it is a good idea to pursue a short sale, whether you are selling a primary residence or an investment property, rather than hopping straight to a foreclosure or bankruptcy. But the tax effect of the short sale or foreclosure of any investment property has to be carefully analyzed before the window of opportunity closes and it is too late to file a bankruptcy case.

Unwelcome surprise: 1099 after foreclosure and short sale

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There is an unpleasant aftershock from a foreclosure or short sale.

A client received the 1099 below last week after the foreclosure of his home. Lenders will issue a 1099 to the borrower after foreclosure and, surprise, the client will owe income tax on the amount in the 1099. The client was quite distressed to get this in the mail.

The 1099 means that he has $189,385.26 more in taxable income for 2009. That is because when a mortgage is foreclosed, it is deemed to be  “forgiveness of debt” and it is counted as income to the borrower, due to the fact that the borrower does not have to repay the mortgage.

Fortunately, since this was the client’s primary residence and, while he must report the 1099 on his taxes,  he can exclude the 1099 from his income. Form 982 is used to exclude the 1099 from income. This was the client’s primary residence and there is an exclusion for primary residences only (no vacation homes or investment properties get this benefit). Had this not been his primary residences (for any 2 of the last 5 years) he would have owed about $60,000.00 in income taxes, which, of course, was money he did not have.

It is always a good idea for a borrower in financial trouble to try to sell the property at a “short sale” before going through foreclosure. Why? First, in a short sale you can at least pay back some of the mortgage and the amount reported on the 1099 issued after closing by the lender will be less than in a foreclosure. After a foreclosure, the entire amount of the mortgage is 1099’d to the borrower.

As I wrote recently, after a short sale or foreclosure, a lender is required to issue a 1099 for the amount that was not repaid.  The lender can also pursue a deficiency judgment against the borrower.  In Illinois, most lenders on first mortgages are simply issuing 1099s after foreclosures and short sales. They are not seeking deficiency judgments, although they could do so. Technically, the lender can do both of these:  a.) 1099 the borrower and  b.) seek a deficiency judgment, but that rarely happens. In practice, most lenders just issue 1099s and don’t pursue deficiency judgments. However, borrowers have to be aware that the issuance of a 1099 does not cut off  liability for signing the note.

Second mortgages are another story and many of those are being turned over to collection agencies, rather than the lender seeking a deficiency judgment.

Many clients are not aware of the 1099 issue. So the best route if you are in financial trouble with real estate is:

  1. File for a loan modification first (although it’s easier to get hit by lightning than to get this approved). The only reason to do this is the new short sale rules that start soon require a loan modification first, before a short sale.
  2. List the house for sale and try to get the lender to approve short sale.
  3. Ask the lender in the short sale for a “no deficiency” payoff, especially if the property is an investment property.
  4. Beware that a 1099 will be issued after a short sale or foreclosure and file form 982 to exclude the 1099 from your income.
  5. At the worst, if the property was not your primary residence, you will have to file for bankruptcy to get rid of the income from the 1099 after the short sale or foreclosure. However, as this excellent post points out, the bankruptcy has to be filed before the 1099 is issued, not after. A bankruptcy filing after the 1099 is issued will not discharge the 1099 income.

Foreclosure and deficiency judgments

Bankruptcy, foreclosures-shortsales, Real estate tax

One sign of a terrible economy,  to me, is how many times per week I discuss with a client how foreclosure works. Clients are worried about foreclosure, but they are especially fearful that the foreclosing lender will obtaining a deficiency judgment against them.  If you check any real estate advice website like Trulia, there are many, many people asking about the effects of foreclosure and how deficiency judgments work. (Update: Illinois courts are now entering deficiency judgments routinely on first mortgages. This post discusses the increase in deficiency judgments.)  Here’s how  deficiency judgments work in Illinois:

Are deficiency judgments allowed in Illinois?

Yes.

What is a deficiency judgment?

If a property is foreclosed, it is sold at a sheriff’s sale. If the property owner owed $100,000 on his mortgage when he was foreclosed, and the property is sold at the sheriff’s sale for $80,000, then the lender can get a deficiency judgment for $20,000.00. This means a court order is entered saying that the owner owes the lender $20,000.00. (As discussed below, obtaining a judgment and actually collecting the judgment are two different things.)

When is a deficiency judgment entered?

Usually, the deficiency judgment is requested in the foreclosure complaint. The judgment is entered at the foreclosure sale confirmation hearing after the sheriff’s  sale at the end of the foreclosure.

Can the lender get a deficiency judgment if I was served by publication in the foreclosure?

No. You have to be personally served by the sheriff or process server. The lender cannot get a deficiency judgment if you were served by publication (as many homeowners are). Another way to get a deficiency judgment entered against you is if you file an “appearance” in the foreclosure case.

What are the chances of the lender coming after me for a deficiency judgment?

If the property was your primary residence, the chances are slim (my  estimate, totally unsupported by facts or statistics, is 5%) that a deficiency judgment will be entered. Very few deficiency judgments are being entered in Cook County according to attorneys I know who practice in the foreclosure area. If the foreclosed property was investment property ,or the mortgage was held by a small local lender, then the chances of a deficiency judgment increase greatly.

What can the lender take from me if they get a deficiency judgment?

A deficiency judgment is like any other judgment that is entered for an unpaid medical bill or unpaid credit card. After the judgment is entered,  the judgment holder serves you with a “citation to discover assets” and you have to go to court and produce a copy of your tax return and a list of your assets.  They use this information to garnish your wages or to take any non-exempt assets from you to pay the judgment.

What assets are exempt from collection after a deficiency judgment?

These items are exempt from judgment:  Life insurance, 401ks, IRAs, $15,000 in equity in a house ($30,000 for a married couple). If your house is titled as Tenancy by the Entirety (married couples and primary residence only) and provided the judgment is only against one, not both, of a married couple, then the entire house would be exempt.  Since we are talking about a foreclosure, it is unlikely that the judgment debtor will even have a house to worry about.  85% of wages are exempt from garnishment too.

How can I get rid of a deficiency judgment?

The only way to get rid of a deficiency judgment is to file a chapter 7 or chapter 13 bankruptcy. A chapter 7 wipes it out altogether. In a chapter 13, it is partially repaid.

Can’t I just give my other assets to my relative to hold for me?

You can gift assets to a relative. But any transfer to a relative or anyone else that is not “for value” can be undone as a fraudulent transfer.  Transfers to relatives are especially suspect. In addition, there is the risk that your relative will not repay you or may get divorced or file his or her own bankruptcy.

If my lender does not ask for a deficiency judgment in the foreclosure, can my lender file suit against me for a deficiency judgment after the foreclosure?

Yes, Illinois law specifically allows a lender to file suit against a borrower after a foreclosure as a separate collection lawsuit.  With first mortgages, this is very rare and most likely will not happen, unless the lender is a small bank or the property was not your primary residence. Some lenders holding foreclosed second mortgages (especially Citibank and Wells Fargo) now hand over the loans to collection agencies to file a separate lawsuit against the homeowner for breach of contract. Read more about that here.

Can my lender file suit against me for a deficiency judgment after I sell my house in a short sale?

Yes. The best practice is to negotiate a “no deficiency”  provision in your short sale.  If you can’t  get that from the lender, then you will have to wait it out and hope that the lender does not ask for a deficiency judgment in the future. Most likely they will not pursue the borrower, but you never know for sure.

If I deed my property back to my lender in a “deed in lieu of foreclosure” can my lender get a deficiency judgment against me later?

No. The lender cannot get a deficiency judgment. Unfortunately,  a deed in lieu of foreclosure is kind of the equivalent of a unicorn; one doesn’t exactly show up in your back yard every day.

How long is a deficiency judgment last?

A judgment in Illinois is valid for 7 years from the date it is entered.

I’ve heard that in a foreclosure my lender can 1099 me for “forgiveness of debt.” Can they 1099 me and get a deficiency judgment against me too?

Usually, if a lender 1099s you, the lender will not seek a deficiency judgment. This is just how lenders operate, not the law.  By law, the lender must issue a 1099 after a foreclosure or short sale. The issuance of the 1099 does not mean that the debt is erased by the lender. It just means that the forgiven debt is taxable to you.

If the lender 1099s you and later seeks a deficiency judgment, the lender would have to issue a revised 1099, that’s all. So the issuance of a 1099 does not bar a deficiency judgment. Technically, the lender can 1099 you AND file for a deficiency judgment. You have to keep in mind that the lender could still get a deficiency judgment after a 1099 is issued. The only sure elimination of both the 1099 and deficiency judgment is to file bankruptcy before the 1099 is issued.

There are several cases that deal with this topic: In re Zaika, a PA bankruptcy court case  and AmTrust v. Fossett in AZ are a couple that summarize the law.

If the foreclosed property was your primary residence,then you have no income from the 1099 by law under the Mortgage Debt Forgiveness Act. If the property was not your primary residence, then you will have phantom income from the 1099 to deal with.

Update on new short sale rules

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Everyone is tired of short sales because only about 20% ever close. Some lenders have started to automate short sales, which may help.

The newest thing in the short sale arena is a program starting in April 2010 that supposedly will simplify short sales. The new program is called HAFA (Home Affordable Foreclosure Alternatives). It is incredibly complicated (like most government programs) and it does not apply to Fannie Mae (FNMA) loans. FNMA loans account for about 55% of all mortgages.

This wonderful post summarizes the HAFA program very well. HAFA is a sister program to HAMP, which is the totally ineffective mess of a program that tries to help homeowners modify their mortgages. Loan modifications have been so unsuccessful that a homeowner has almost as good of a chance of winning the lottery as having his or her loan modified. In fact, before pursuing a short sale approval under HAFA, the homeowner has to first apply for, and not qualify for and be denied or not complete, a loan modification under HAMP (that shouldn’t be too hard since none of the modification programs work at all).

A lender that chooses to participate in the HAFA short sale program will be paid by the US government. Hopefully, this will be enough of an incentive to get lenders to participate in the short sale program.

Here are some good things about the HAFA short sale program:

1. The homeowner/seller can get “pre-approved” by the lender for a short sale.

2. The homeowner must be released from future liability.

3. Real estate commissions can’t be reduced by the lender.

4. Best of all, the program sets timelines for responses by the lender. Short sales so far have been slow moving death marches that average about 6 to 7 months to get an approval. The lender has 10 business days to respond to a short sale offer.

Some not so good things about HAFA:

1. Must first apply for HAMP loan modification (have fun with that… virtually none of these get approved).

2. Must be borrower’s primary residence, no investment properties.

3. Mortgage must be delinquent (some short sales are current).

4. Complicated program with 43 pages of instructions.

Overall, I would say that this is a step in the right direction and an attempt to bring order to the short sale maze.