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2010 Road to Home Web Seminar Series:
Short Sale Basics
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Your web seminar host
Alan GranthamVP, Corporate Business Manager
CitiMortgage Corporate Programs
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Homebuying Basics
Topics• Definitions
• How do short sales differ from foreclosures?
• How do short sales really work?
• What is the Home Affordable Foreclosure Alternatives (HAFA) Program?
• 10 Steps to short sale buying
• Questions
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Homebuying Basics
Definitions
Short Sale: An agreement between the borrower in distress and lender that allows the borrower to sell the house for less than the outstanding principal balance and give the proceeds to the lender. It is an alternative to foreclosure or a deed in lieu of foreclosure.
Deed in Lieu of Foreclosure: A deed in which the borrower voluntarily gives the collateral property to the lender in exchange for a release from all obligations under the mortgage, thereby preventing foreclosure.
Foreclosure: The process by which mortgaged property enters into the possession of the lender without right of redemption by the borrower, usually for reason of delinquency in mortgage payments.
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Homebuying Basics
How do short sales differ from foreclosures?
• Credit Scores
• Short sales and foreclosures both tend to lower FICO scores by a similar number of points.*
• Waiting periods before buying a new home
• On average, the waiting period for buying a new home is longest after a foreclosure and is shorter after a deed-in-lieu or a short sale.*
• Contact your credit bureau for impacts that affect you.
*http://www.myfico.com/crediteducation/questions/foreclosure-alternatives-fico-score.aspx
*https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/sel1008.pdf
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Homebuying Basics
How do short sales really work?
• To start the short sale process, a borrower must reach out to the servicer, who positions the following conditions:
• The property should be a primary home, secondary home or investment.
• In most cases, the mortgage on the property must be at least 31 days delinquent by the time of the short sale.
• The Realtor must have listed the property at fair market value for 90 days, though a short sale may be accepted during this marketing period.
• The lender must be provided a copy of the listing agreement.
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Homebuying Basics
How do short sales really work (cont.)
• All parties must ratify a sales contract, including all addendums, and provide it to the lender at least 72 hours prior to closing.
• The transaction must be an outright sale to a third party and should be an “arms length transaction,” closing within 30 days of contract approval.
• A Broker Price Opinion, which provides the estimated value of a property, will need to be completed.
• The mortgage lender will give a “Letter of Approval” that provides authorization and acceptance of a short sale settlement with conditions.
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Homebuying Basics
How do short sales really work (cont.)
• After the investor approves the short sale, closing will need to take place at either an escrow, title company or attorney office.
• The name of this closing agent must be provided to the Mortgage Lender 72 hours prior to closing.
• An original certified final closing statement (HUD-1) signed by all parties and a check for the proceeds of the property sale must be sent and received by the lender 24 hours after the close of escrow.
The Mortgage Lender will only accept the short sale if ALL the above conditions are met.
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What is the Home Affordable Foreclosure Alternatives (HAFA) Program?• The HAFA Program was implemented in April 2010 by the Treasury
Department.
• HAFA is an option for distressed homeowners who meet the Home Affordable Modification Program’s (HAMP) eligibility requirements but could not successfully modify their loans under HAMP.
• The borrower agrees to a short sale or deed in lieu.
• Under HAFA, the borrower is eligible to receive up to $3,000 to help with relocation costs.*
http://makinghomeaffordable.gov/docs/HAFA_Broch.A.PDF
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Homebuying Basics
10 steps to short sale buying*:
1. Identify potential short sales
2. View the property
3. Do your research
4. Find all liens and mortgages
5. Figure out your financing
6. Contact the lender
7. Complete the lender’s short sale application
8. Assemble the proposal
9. Negotiate
10. Seal the deal
* http://www.bankrate.com/finance/money-guides/10-crucial-steps-to-short-sale-buying-1.aspx
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Questions?
If you have a question that has not been addressed during today’s web seminar, please email me:
Alan Grantham
