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Las Vegas, NV (Apr 6) – Home Affordable Foreclosure Alternatives (HAFA), a portion of the Obama administration’s $75 billion government program to help underwater homeowners, went into effective on Monday. This should come as good news to the more than 70 percent of the homeowners in Las Vegas facing mortgage payments much higher than the actual worth of their homes.
Short selling, selling one’s home for less than the monies owed, involves the approval of the lending institution to complete the transaction. Banks and other mortgage services were taking weeks, often months, to approve or disapprove sales. Often short sales were derailed over “last-minute” disagreements. HAFA serves multiple purposes by streamlining the process to a 10-day short-sale approval procedure as well as forgiving mortgage debt. No longer will banks be able to file deficiency judgments to collect the difference between the short-sale amount and the outstanding, current loan.
Short sales often leave thousands, if not hundreds of thousands, of dollars between existing and new loans. Nevada was one of six states where a deficiency judgment could follow the previous owner, for life, and allow banks to garnish future wages, etc. In essence, even though the house no longer belonged to the first party, the previous borrower faced the potential of being legally responsible for any shortfall. According to RealtyTrac, a company that keeps tabs on the housing market, one in 19 Las Vegas households is in serious trouble with their mortgage.
HAFA is an option both lenders and homeowners can fall back on should their applications and appeals for the original Making Homes Affordable plan fail. It also provides financial incentives to both lender and borrower to complete the short sale in a timely manner.
Experts have estimated 20 years before Nevadans can expect to see a potential return to housing prices that peaked in 2006. Pursuing home loan modifications, and having HAFA as a backup option, may help remove some of the stress for homeowners in a state facing crippling unemployment.