In early May, Illinois Association of REALTORS® (IAR) Housing Policy Advisor, Sharon Gorrell and I attended a meeting in Washington, D.C., with the U.S. Department of the Treasury, bank servicers and other REALTOR® Association representatives to discuss flaws in the system of approving short sales and deed-in-lieu of foreclosure transactions through the Home Affordable Foreclosure Alternatives program (HAFA). What was clear in the meeting was that the system as it stood clearly was not working. Since that time the Treasury has implemented some of the discussed modifications that came out of that meeting. While it certainly won’t be a “cure-all,” we hope that our participation and contributions will help the transition out of this economy and market and aid in removing units from the marketplace quicker and easier. The anticipated result is a supply of housing that is in balance with the true demand that generates fair value pricing of the overall inventory.

Some of the highlights of Supplemental Directive 11-08 are the creation of a HAFA Matrix, re-evaluation of list price, and approved uses of borrower relocation credits.  First, since the requirements for short sale approvals can be different depending on the institution or investors, REALTORS® felt a “clearinghouse” of information would go a long way in helping both practitioners and their clients know up front what was required for short sale approvals. This matrix is designed to assist in that effort. The matrix will be available after Oct. 15 on participating bank websites in addition to MakingHomeAffordable.gov.

Secondly, in an attempt to make property valuations more accurate a “re-evaluation” policy has to be included to allow for borrower or borrower’s agents pricing data to be reconciled with the servicers independent assessment. Lastly, authorization has been included to expand the use of borrower’s relocation incentive dollars to cover costs related to minor repairs that come up during buyer inspections or unpaid final utility bills. A few other topics addressed included dollar caps on release of non-mortgage subordinate liens, communication timelines and reporting requirements.  This is not an exhaustive list and more information is available online.

To get a detailed review of the broader changes you can review the entire Supplemental Directive online at www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1108.pdf. Also, we recommend consulting with the respective bank servicers or consulting the Treasury website www.hmpadmin.com for more specific details and guidance on the program.

Loretta Alonzo, CRB, GRI, is the 2011 President-Elect for the Illinois Association of REALTORS®.