Mortgages Blog

Finance Blogs » Mortgages Blog » Short sale failure

Short sale failure

By Polyana da Costa ·
Friday, August 19, 2011
Posted: 9 am ET

More than a year has passed since the government launched the Home Affordable Foreclosure Alternatives program, or HAFA, a short-sale program that provides incentives to lenders and homeowners in an effort to avoid foreclosures. But few have benefited from the program.

With so many homeowners struggling to pay their mortgages, you would think  millions of borrowers would have benefited from HAFA, or the Home Affordable Foreclosure Alternatives program. But lenders have completed only 10,438 short sales since the program started, according to a recent report released the Treasury Department.

The government has spent less than $10 million of $4.1 billion allocated to the program.

Yes, HAFA is another failed government program. And it's supposed to last through the end of next year.

What's the point?

Lenders don't seem to be enticed by the mere $1,500 that the government offers them for every short sale completed under the program. Also, under HAFA, lenders are not allowed to go after the homeowner to collect the loan balance in the future.  They have to forgive the difference between the total amount of the loan and whatever price the house sells for.

The program was created to offer an option for homeowners who don’t qualify for a loan modification under HAMP, the Home Affordable Modification Program -- another failure.

But in case you are in the process of trying to get approved for HAFA or thinking about applying for it, don’t give up. Maybe you'll be be part of the small group of lucky homeowners who were able to benefit from HAFA.

Here is a list of how many short-sale transactions each lender completed since the beginning of the program through June, according to the latest servicers' performance report:

  • JP Morgan Chase: 3,596.
  • Wells Fargo completed 3, 123.
  • Bank of America did 1,873.
  • Select Portfolio Servicing, 591.
  • Litton Loan Servicing, 483.
  • All other servicers: 1,088.

Follow me on Twitter @Polyanad

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.