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Law Office of ALG & Associates Comments on Changes to HAFA Rules for Approval of Short Sales


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Home Page > Law > Law Office of ALG & Associates Comments on Changes to HAFA Rules for Approval of Short Sales

Law Office of ALG & Associates Comments on Changes to HAFA Rules for Approval of Short Sales

Posted: Mar 01, 2011 |Comments: 0
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On February 1, 2011, new rules for the approval of short sales under the Home Affordable Foreclosure Alternatives program went into effect.  The rule changes include:

 

 

·         Monthly Gross Income.  Although borrowers must provide updated financial information, servicers are no longer required to verify borrower’s financial information or to determine if the borrower’s total monthly mortgage payment exceeds 31% of the borrower’s monthly gross income.  Borrower need only provide demonstrable evidence of hardship by signing a hardship affidavit or request for modification and affidavit.

 

·         Vacant Property.  To be eligible, the property must be or must have recently been the borrower’s principal residence.  A property that is vacant or has been rented to a non-borrower is eligible if the property was owner occupied within 12 months of the date of the short sale agreement and the borrower has not purchased a replacement property.  The borrower no longer has to show that his or her relocation was due to re-employment or transfer of employment.  Similarly, servicers no longer need to verify the number of miles the borrower moved from the property.

 


·         Release of Subordinate Liens.  Subordinate liens will continue to be paid in order to priority.  The 6% percent on payments to subordinate lienholders has been eliminated.  Servicers now have the discretion to pay subordinate lien holders up to the $6,000 aggregate cap.  Investors remain eligible for incentive reimbursements up to one-third of the cost of releasing the subordinate liens.

 


·         Response to Request for Approval of Short Sale.  Within 30 days of receipt of an executed sales contract and short sale packet, the servicer must communicate approval or disapproval of the sale or provide a counter offer.

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·         Real Estate Brokerage Commissions.  The real estate commission that may be paid shall be the amount indicated in the listing agreement between the borrower and the listing broker, provided that such commission shall not exceed six percent of the contract sales price. When the servicer has retained a contractor to assist the listing broker with the transaction, the servicer must include a statement in the short sale agreement that any associated vendor fees will not be charged to the borrower or deducted from the real estate commission.   

 

·         Alternative Deed-in-Lieu Programs.  Deed in lieu agreements between servicers and borrowers that provide an option for the borrower to continue to occupy the property on a rental basis (deed-for-lease) or provide an opportunity for the borrower to repurchase the property at some future time are eligible for financial incentives under HAFA.  At the discretion of the servicer in accordance with investor guidelines, the borrower relocation incentive may be paid either upon the successful closing of the deed in lieu transaction or at a future time when the borrower vacates or repurchases the property.  Conditional deed in lieu agreements that allow a borrower to reinstate the original loan following some period of rental occupancy are not eligible for HAFA incentives unless and until the deed in lieu is final and the borrower no longer has the option of reinstating or modifying the original first mortgage lien. 

 

·         Borrower Notices.  When a borrower who was not previously evaluated for modification requests a short sale or deed in lieu and the servicer determines that the borrower meets the HAMP eligibility requirements and will be solicited for HAFA, the servicer must notify the borrower verbally or in writing of the availability of HAMP and allow the borrower 14 calendar days from the date of the notification to contact the servicer by verbal or written communication and request consideration for HAMP.  This Supplemental Directive clarifies that  this notification may be given simultaneously with the servicer’s consideration of the borrower for HAFA.  

 

 

These rule changes are intended to facilitate short sales and decrease the time for approval.  However, in a recent survey by Equi-Trax, 53.6% of persons surveyed indicated that short sales transaction take, on average, 4 to 6 months. 

 

 

Law Office of ALG & Associates commented that “these rule changes will greatly speed up the processing time for short sales.”  However, Law Office of ALG & Associates cautioned that “it has never been more important to find an experienced short sale specialist” as the “these rules will only assist knowledgeable practitioners.”  Law Office of ALG & Associates attributes delays in short sale approvals “not only due to lenders but also due to poorly worded and poorly documented short sale requests from inexperienced professionals.”

 

 

Looking for a short sale specialist in Los Angeles?  Contact Law Office of ALG & Associates at 888-LAW-3111.

 


 

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I was denied a Hamp mod due to NPV caculations. My lender will not explain these terms to me. They said they cannot help me. I need to short sale and get out. Can u please help me
What are tax implications of short sale ?
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What’s happening in the housing market? What’s being done about it? Learn about the government’s new HAFA program, providing foreclosure avoidance options including short sales and deeds-in-lieu of foreclosure. Here’s the big picture, clearly explained.

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TheShortSaleGenius.com HAFA has been updated! But what is it going to mean to you, me and the homeowners we serve? We predicted this in late 2009. HAFA has helped 661 homeowners as of the end of 2010. So seeing that the program wasn’t working, there is an update in an attempt to jump start it. First, they’ve waived the requirements for the bank to check the homeowner’s finances and debt to income ratio. I’m not sure how big a deal this is to the lenders, but we’ll see. Second, they won’t be dictating how the second lien will receive their cut, but the $6000 cap is still in place. This may help for smaller second liens, but I’m not expecting much out of this. Third, the bumped the time the banks have to respond to a HAFA short sale from 10 days to 30 days. We called it when HAFA was released; no bank that has any meaning is going to evaluate a file and APPROVE a short sale in 10 days. They just can’t do it with the swamp they operate in. Knowing their internal expectations for the flow of a short sale, I’m going to say 30 days still is not going to make a difference, but I’m sure that wasn’t the point. Watch the entire video to hear our 2009 prediction of what HAFA would do. And no, we didn’t call it a “GAME CHANGER”. The bottom line is, real estate professionals must know what they are doing. The banks, the government, and even the organizations that are supposed to support us, won’t be doing anything to really change the game…it’s up to you!

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Trilogy Property Solutions, the Legal Short Sale Specialists, interviews Ron Ballard, top short sale attorney on the current state of real estate market to stay on the cutting edge of helping homeowners in foreclosure with doing short sales correctly, legally, and ethically. Its our priority to constantly be aware of new California real estate regulations to make sure that everything we do is moral and abides all foreclosure laws designed to protect homeowners from people who are taking advantage of distressed homeowners. At lunch with Ron Ballard, Esq., and Jeff Watson, Esq. the two top short sales attorneys in the country, we learned even more on how to help home owners legally, correctly, and ethically in this ever changing legal climate on real estate, especially here in California! These times are definitely exposing the greedy from the helpful. Short sales can be done ethically or unethically, and its crucial that homeowners and realtors screen the parties they get involved with carefully. Legal and ethical short sales are done with complete transparency and full disclosure to all parties; the bank, the homeowner, the realtors. This is created through the right documentation and information provided to the right parties at the right time. If someone does not know what theyre doing, they can possibly create enough chaos to lead the property straight to foreclosure. Many realtors are not trained well enough in short sales to prevent a foreclosure, but many homeowners

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Pros and Cons for Homeowners in Massachusetts and New Hampshire Participating in the HAFA Short Sale Program


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Home Page > News and Society > Economics > Pros and Cons for Homeowners in Massachusetts and New Hampshire Participating in the HAFA Short Sale Program

Pros and Cons for Homeowners in Massachusetts and New Hampshire Participating in the HAFA Short Sale Program

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Posted: Oct 14, 2010 |Comments: 0
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Short sales are confusing enough, but let’s throw a new program into the mix.  It’s called HAFA.  Now to not confuse you even further, I’m going to talk about the good old regular HAFA program and not the Freddie Mac/Fannie Mae HAFA short sale program.

Homeowners need to be aware of the pros and cons of the HAFA program.  I received two calls this week from agents who were furious when their short sales were approved the lenders “kept the right to pursue the deficiency” and gave no relocation assistance.

Here’s why:

SECOND lenders do not have to participate in the HAFA program so even though it’s Chase or Wells or whoever the second lender is and they independently participate in the HAFA program as a second lender on the property they do not have to comply with the HAFA program.  The agent’s going into these short sales didn’t realize that.  Not only were the agent’s furious about the homeowners, the lenders in both cases CUT the commission to get an approval.  Imagine that?  A short sale lender cutting an agent’s commission?  Well THERE’S something you don’t see every day right?  WRONG!!

So let’s go over the basics for the HAFA program.

The PROS:

If you only have ONE mortgage and that mortgage company is a participant and approves your short sale there are some PROS:

1)      You will be released of the deficiency (the difference in the accepted offer to what you owe- for example you owe $225,000 and someone offers $175,000 you will be released of that $50,000 deficient amount.  The lender will not go after you)-This doesn’t mean you won’t have tax liabilities.

2)      You can get up to $3000 in moving expenses.

3)      The lender will need to respond in 10 days to the buyer’s offer-THIS DOES NOT MEAN you will GET AN APPROVAL in 10 days.  They just need to respond and a response is, “Hey we’ve received it and we’re looking at it”

 

Those are VERY strong reasons to attempt a HAFA short sale if you QUALIFY! So let’s see if you actually qualify….

These are some of the qualifiers for HAFA:

Property must be the homeowner’s primary residence.- No investment or second homes will be considered. “The property is the borrower’s principal residence, except that the property can be vacant up to 90 days prior to the date of the Short Sale Agreement (SSA), Alternative Request for Approval of Short Sale (Alternative (RASS) or DIL Agreement if the borrower provides documentation that the borrower was required to relocate at least 100 miles from the property to accept new employment or was transferred by the current employer and there is no evidence indicating that the borrower has purchased a one- to four-unit property 90 days prior to the date of the SSA, Alternative RASS or DIL Agreement.” [From the Supplemental Directive]
The first mortgage must have originated before 2009.
Mortgage payments must be delinquent OR default is reasonably foreseeable.
Unpaid balance is not more than $729,750.
If a homeowner hasn’t applied to HAMP the servicer will require a completed Request for Modification and Affidavit along with verifiable financial hardship evidence that the homeowner’s financial situation meets the 31% income eligibility requirement.
Homeowner’s TOTAL monthly payment PITI-(principle, interest, taxes, insurance and HOA dues) MUST EXCEED 31% of their GROSS MONTHLY INCOME.

Ok. Great.  You qualify and you’ve applied to HAFA and are enrolled in the program:

Here are the CONS:
 1) Mandatory deed in lieu – The homeowner is required to sign a deed in lieu requiring them to hand back their house to the bank if the home doesn’t sell.  This is the number one reason I would never have a homeowner sign up for HAFA – a Deed in Lieu is a “friendly foreclosure” and reports on your credit report very similar to a foreclosure

            2) 120 days.  You have 120 days to sell your home through HAFA from when they MAIL you the SSA (Short Sale Application) – If you don’t sell your home in that time, refer to #1.  You agreed to a friendly foreclosure – deed in lieu.  You MAY be given additional time to market your home, but don’t bet on it.

            3) Your lender will set the price for the property.  A BPO is done PRIOR to listing the property. The BPO agent is hired by YOUR LENDER and if that BPO agent is not experienced with the home market in your area you could be in trouble.  They are not responsible for the accuracy of the list price and have no responsibility to you in the event the property is not sold.

***Side note: Last week I got a call from a homeowner who had Bank of America as a lender and had NO idea she had enrolled in the HAFA program.  Her agent had not fully explained what was going on and she didn’t know what she agreed to.  She asked me to buy her home.  Now we buy short sales.  We love short sales, and that’s what we focus on for investing but we cannot buy every short sale and we have to qualify them.  I immediately called her agent and spoke to him.  He informed me the lender set a price of $177,000 for the property.  They got one offer in for $120,000 in which I’m sure you can guess the outcome.  They (BOA) denied the offer.  The home needed a tremendous amount of work.  It’s value really was closer to $100,000 with all the repairs it needed and the location didn’t help it’s value.  I explained to her we could not buy it because we would be no where near an acceptable offer for BOA.  It was heart breaking to explain to her that if she didn’t get an offer, she would likely be looking at the deed in lieu****

4) HAFA is a set of guidelines.  It’s not law, so if the lender doesn’t follow protocol, there really isn’t a legal action that can be taken.

            5) Each participating lender develops their own written policy, consistent with investor guidelines, that describes the basis on which the lender will offer the HAFA program to borrowers. You do not get to see the guidelines. However, the  guidelines are submitted to the government. So how are you to seriously know if the guidelines have been broken?  Makes a LOT of sense huh?

            6) Servicers may amend the terms of the SSA in accordance with investor requirements – Basically this means lenders can do whatever the heck they want and well, then why would anyone consider HAFA?  Lenders do whatever they want with a good old traditional short sale and you don’t have all the other negatives.

            7) Homeowners must make partial mortgage payments through the process.  These payment amounts are determined by your lender.

            8) COMMISSION ISN’T PROTECTED – This one is really for the agents out there.  I think that’s why the agents we work with really like us.  THEIR COMMISSION is PAID IN FULL.  Here’s the thing.  If a second lender wants commissions slashed to approve the short sale within HAFA your commission is not protected at 6% and then it truly isn’t a HAFA short sale as the agents we spoke with this week found out.

The reason I wrote this is because of the two agents who worked very hard on what they believed was a HAFA short sale releasing the homeowner of any deficiency and allowing a $3000 moving credit.  Their frustration with the 5-6 months they wasted only to have the end result be similar to a traditional short sale was evident. PLEASE keep in mind second lien holders DO NOT necessarily participate in the HAFA process EVEN if they area HAFA approved lender.

We purchase MULTIPLE short sales and don’t put offers on any HAFA short sale property because we don’t believe in having a homeowner sign a deed in lieu to be part of the program.  I am not saying the program doesn’t have it’s benefits, but homeowners, agents, and everyone else involved need to know ALL the pros and cons before making a decision on how to short sale their home, whether through HAFA or a traditional short sale.

Maryann Little works with homeowners in preforeclosure.  Her company Rapid Property Relief, LLC focuses on preforeclosure acquisition and negotiation in New Hampshire and Massachusetts.  For more information go to http://rapidpropertyrelief.com.

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Maryann Little works with homeowners in preforeclosure.  Her company Rapid Property Relief, LLC focuses on preforeclosure acquisition and negotiation in New Hampshire and Massachusetts.  For more information go to http://rapidpropertyrelief.com.

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Maryann Little works with homeowners in preforeclosure.

Comments No Comments »

Is it true the government is actually paying people to walk away from their mortgage or do a short sale to get out of their home? Is it a good idea and will it work? Thanks!

Comments 2 Comments »


I have an update on HAFA that you will find helpful. The media is making me crazy. I saw an article last week titled Automated Short Sales on the Way as HAFA Nears. If you follow me on twitter you might have seen me go off on this article. When you watch the video you will understand…

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