Foreclosure Alternatives Program (FAP)
On December 8, 2009 the Treasury Department announced details of the newly developed Foreclosure Alternatives and Home Price Decline Protection Incentives as a part of the Making Home Affordable (MHA) Program.
Lou’s Commentary: At first reading it appears to me that this Program is entirely VOLUNTARY on the part of servicers who may or may not be the investors and may or may not have the authority to opt-in to the Program. So, it remains for me unclear what degree of impact the Program will have in providing significant “foreclosure alternatives.” When more information is available it will be posted here.
The MHA Foreclosure Alternatives Program (FAP) is meant to simply and streamline the short sale and deed in lieu (DIL) process by providing additional incentives, a standard process flow, minimum performance time frames and standard documentation.
• Standardized Documentation including Short Sale Purchase Agreement and Offer Acceptance Letter.
• Servicer will independently establish both property value and the minimum acceptable net return in keeping with investor guidelines and provide instructions to the distressed homeowner regarding list price and any permissible reductions–based on either an appraisal in accordance with USPAP and/or one or more Broker Price Opinions (BPOs) done within 120 days of the Short Sale Purchase Agreement.
• Minimum and Maximum Duration: Distressed homeowners will be allowed at least 90 days to market and sell the property with possibly more time based on local market conditions. Marketing can run concurrently with the foreclosure process but no foreclosure can take place during the marketing period specified in the Short Sale Agreement as long as the distressed homeowner in acting in good faith to sell the property which includes having the property listed with a licensed real estate broker who is experienced in selling properties in the neighborhood. The maximum covered marketing period is generally no more than one year.
• The Program is open until December 31, 2012 for payments to be made upon a successful completion of a short sale or DIL.
• Reasonable and customary real estate broker commissions and selling costs that may be deducted from the sales price will be specified in the Short Sale Agreement. Participating servicers must agree not to negotiate a lower sales commission after an offer has been received.
• Servicers may not charge distressed homeowners fees for participation in the Foreclosure Alternative Program. The Program is open until December 31, 2012 for payments to be made.
• The Treasury Department will share the cost of paying junior lien holders to release their claims, matching $1 for every $2 paid by the investor to a junior lien holder up to a total of $1,000.
• At the servicer’s option, the Short Sale Agreement may include a condition that the distressed homeowner agrees to deed the property to the servicer in exchange for a release from the debt if the property does not sell within a time specified in the Short Sale Agreement or any of its extensions. In case of a DIL the distressed homeowner would have 30 days to vacate the property and would be entitled to $1,500 to assist in relocation expenses, in addition to any other funds the servicer may agree to provide.
