By Sara Huebener
Just a few more notes on HAFA.... we continue to learn new information on this each day. Many are skeptical that the lending world will be ready to implement HAFA by April 5, as a huge multi-office-wide discussion this morning uncovered. We shall see. Here are a few more tidbits about HAFA.....
The program is up to the lender's discretion on whether or not it chooses to participate.
Why would a lender choose to participate? Some might not. Those that do opt to participate might do so because it is a chance to collect the financial incentive to accept the short sale and "be done with it", no matter how insignificant that compensation might be. A first lien-holder can collect up to $1000 in compensation for participating in HAFA. Secondary lien holders can only collect from an aggregate pool of $3000 total. On a large, outstanding loan, this is not much.
If a lender opts to participate in HAFA on any given transaction, it waives its right to come after the borrower in the form of a deficiency judgement. That said, some lenders might elect NOT to participate in HAFA and attempt to go after the borrower down the road. Of course, if the borrower later files for bankruptcy, the lender cannot collect on any deficiency judgement it might have won.
Borrowers will have tax consequences for any financial gain on the short sale - referring to the $1500 relocation assistance. They should be consulting with a tax accountant as they go through the short sale process as other portions of the short sale debt relief may be taxed as income, depending on individual situations.
Investment properties going through a short sale ARE subject to debt forgiveness being taxed as income in the form of a 1099.
NOTE ** The borrower relocation assistance has been increased to $3000.
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