Feds Increase Incentives for HAFA Short Sales

The Treasury Department has increased the incentives for servicers, investors and distressed homeowners to participate in an expedited short sales program that goes into effect April 5. Under the Home Affordable Foreclosure Alternative program, the servicer can receive a $1,500 incentive and the homeowner can receive $3,000 when a short sale or deed-in-lieu transaction is completed. "That $3,000 is going to turn some heads," said Travis Olsen, chief operating officer of Loan Resolution Corp. "That is going to make it truly worthwhile" for the borrower to complete a short sale, he added. LRC specializes in short sales. Last December, Treasury proposed to pay the servicer only $1,000 and the homeowner $1,500 for relocation costs. Treasury also doubled the maximum payoff for subordinate lien holders that relinquish their claims and the reimbursement for first mortgage investors. Now the investor can pay the second lien holder up to 6% of the loan amount with a $6,000 cap and be reimbursed on a one-for-three match for up to $2,000. Originally, Treasury capped reimbursement at $1,000 and the payoff at $3,000. Subordinate liens must be extinguished under HAFA so the property can be sold and the former homeowner can walk away debt free.