It seems one of my files is nearing approval with BofA. I just received an email from the negotiator stating that their vendor sent out paperwork for the homeowner to sign up for the HAFA program if he chooses to do so. Does anyone know how this will affect my flip? Should I advise the homeowner to agree to the HAFA program or call in and request not to be a part of it?
Any advice would be appreciated. I am ready to close this and there is a great spread even with the 30 day hold but I am not sure how him signing up for HAFA will affect me....
I agree with James. There is much misinformation about HAFA out there most of which is coming from people who listen to a slanted view. Even on BP you will find many of us who have disdain for this program including myself. Take some time to do your own due diligence as you will undoubtedly be faced with the NAR's campaign and their millions of drone's who like nothing more than to simplify the distressed sale process since they are not allowed to stray from the beaten path. NAR, as we speak, are preparing to tell millions of distressed sellers that they now have the tools to assist homeowners to receive a paycheck. Nevermind their national shortsale success rates are around one-third which means they will be forcing taxpayers to flip the bill for billions of dollars of assistance to the banks.
No matter what our personal feelings are, HAFA will no doubt be useful to some borrowers and we should not try to influence their decisions.
A couple of things to point-out:
1. The program is NOT mandatory. If your seller has previously participated in the HAMP program and they do not wish to Participate in the HAFA program, then have them put it into writing opting out of the HAFA program. Provide the letter as part of your short sale submission.
If they did not participate in the HAMP program, it is not a primary residence, or is a Freddie Mac or Fannie Mae loan, then you need not worry about HAFA(although the Freddie Fannie thing could change). I have also been told, but I am not exactly 100% on this one, but if a foreclosure has already been initiated, the lender will not participate in the HAFA program since it has already expensed the foreclosure fees.
2. The program is somewhat open to intrepretation. The HAFA program is a set of guidelines for the lender to qualify for federal aid. The lender themselves will undoubtedly twist the facts to fit their agenda if it benefits them. So, there will be no one size fits all.
3.One thing you should not do, is steer your client away from these programs. Give them the facts, then let them make their own decision.
Good Luck.
The seller is not obligated to participate in this program but if I were you I would have the seller to sign and notarize a waiver on this HAFA deal and forward it to the lender. My understanding is that HAFA won't allow you to flip the house for 90 days just like the old FHA crap. Stay away from HAFA!
Offsetting that $3k for moving expenses the Homeowner has to pay 31% of his gross income each month as a mortgage payment while the short sale is underway. It does restrict your resale to 90 days, so a higher cost of your funds to hold versus a 30 day hold under standard (not HAFA) processing. By signing up the Homeowner also agrees to a Deed in Lieu of Foreclosure. If for some reason you are not able to get it sold within 120 days they can enforce that Deed in Lieu.
Curious? I didn't see any info. in your post about whether the owner/borrower is behind or in default on his mortgage. If there is a hardship, then owner must first participate in HAMP (loan mod), If that doesn't work the HAFA guidlines are used for either a short sale and/or Deed in Lieu. Both programs are mandatory. Under HAFA the short sale is pre-approved at a specific minimum price or net proceeds before the home is put on the market. The home must be listed for sale with a licensed realtor. The home owner cannot have a close business or personal relationship with the re. agent or buyer and cannot have an expectation of buying back or renting the home after the short sale or DIL closes. The buyer cannot resell the home within 90days of the purchase. With all that said; The loan servicers are required to participate and write their own policies subject to investor guidelines. For more info. go to .Gov web site. HAFA is complex with many rules and guidlines. I just spent a half day in class going over all this B.S. Good luck Lafi.
Matt,
"Both programs are mandatory." What do you mean by this?
HAFA states:
"Borrower Solicitation and Response. If the servicer has not already discussed a short sale or DIL with the borrower, the servicer must proactively notify the borrower in writing of the
availability of these options 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 under HAFA. If the borrower fails to contact the servicer within the timeframe or at any time indicates that he or she is not interested in these options, the servicer has no further obligation to extend a HAFA offer."
This says to me if the homeowner doesn't want to participate, they don't have to.
Matt, I am not sure that both programs are mandatory. I do know that the borrower applied for HAMP and it didn't work out. That is when he contacted me. Also, according to the negotiator, he has the option to participate and that it is not mandatory.
Folks,
You need to be VERY careful following all the advice given on this thread. Some of the information that has been given is COMPETELY WRONG!!!!
Please verify everything you read here.
I agree with James. There is much misinformation about HAFA out there most of which is coming from people who listen to a slanted view. Even on BP you will find many of us who have disdain for this program including myself. Take some time to do your own due diligence as you will undoubtedly be faced with the NAR's campaign and their millions of drone's who like nothing more than to simplify the distressed sale process since they are not allowed to stray from the beaten path. NAR, as we speak, are preparing to tell millions of distressed sellers that they now have the tools to assist homeowners to receive a paycheck. Nevermind their national shortsale success rates are around one-third which means they will be forcing taxpayers to flip the bill for billions of dollars of assistance to the banks.
No matter what our personal feelings are, HAFA will no doubt be useful to some borrowers and we should not try to influence their decisions.
A couple of things to point-out:
1. The program is NOT mandatory. If your seller has previously participated in the HAMP program and they do not wish to Participate in the HAFA program, then have them put it into writing opting out of the HAFA program. Provide the letter as part of your short sale submission.
If they did not participate in the HAMP program, it is not a primary residence, or is a Freddie Mac or Fannie Mae loan, then you need not worry about HAFA(although the Freddie Fannie thing could change). I have also been told, but I am not exactly 100% on this one, but if a foreclosure has already been initiated, the lender will not participate in the HAFA program since it has already expensed the foreclosure fees.
2. The program is somewhat open to intrepretation. The HAFA program is a set of guidelines for the lender to qualify for federal aid. The lender themselves will undoubtedly twist the facts to fit their agenda if it benefits them. So, there will be no one size fits all.
3.One thing you should not do, is steer your client away from these programs. Give them the facts, then let them make their own decision.
Good Luck.
I totally agree with Scott.
You must educate yourself about this and all other programs available. Make sure you can also educate Property Owners.
Much "false" information is being given and even taught about HAFA.
Very, very tricky!! So what do you say when you receive that first call from the SS seller?
I think some misunderstood my post about "Mandatory"! My post refers to the Servicer/Lender not to the borrower. The reason why the HAFA program came about is because under HAMP, very few mortgages were being modified. Over 50% of borrowers never responded back to their lender to pursue a loan mod. So far the program is a total failure in helping people stay in their homes. HAFA is just another alternative (under HAMP) program to allow the borrower to short sale the property(must be preapproved by the lender) or give up the deed and walk away. Which in turn the lender is required(mandatory) to compensate the borrower $ . Plus forgive the deficiency judgement. If the borrower went through a loan mod. already and was found to not be qualified it's usually because no real hardship exists.
HAFA provisions:
* Eligible homeowners are those who acquired the home as a principal residence before Jan. 1, 2009 and have a mortgage balance no larger than $729,750.
* The owner's monthly mortgage payment(PITI) as well as homeowner association dues, must exceed 31% of their income, and homeowners must prove financial hardship-loss of income, an increased mortgage payment or other unexpected expense.
* Eligible homeowners also must have been previously considered for other federal foreclosure prevention options, including a refinancing or mortgage mod.
* Instead of having a buyer in hand, homeowners can get preapproved for a short sale before the property is listed, provided the lender agrees upon a minimum acceptable short-sale amount,
* Homeowners who successfully sell short can get up to $3K to help defray moving costs after the deal is don. Loan servicers can get up to $1500. to help cover costs of the deal. Loan servicers can use some of the loan proceeds to buy out subordinate lien holders with payments of up to $6K, provided the subordinate lien holder agrees to releasing the lien and freeing the homeowner of all liability.
* The lender can't require a cash contribution from the homeowner, nor can the lender require that the owner sign a promissory note at the closing. The lender also cannot go after the borrower for a deficiency judgment based on the difference between the selling price and the last mortgage balance-as has been the case.
* If the short sale fails, the program comes with a backup deed-in-lieu-of foreclosure option, where the owner hands over the property to the bank with the same cash incentives.
* The Government's directive excludes loans excludes loans that are owned or guaranteed by Fannie Mae or Freddie Mac.
* The homeowner must sign a short sale agreement or DIL agreement on or before Dec. 31, 2012.
* The home must be listed for sale with a licensed local-area real estate professional. (Doesn't apply to DIL).
* The homeowner must cooperate with the real estate agent's efforts to sell the home and maintain the interior and exterior of the home.
* The servicer and homeowner must meet a number of time frames.
* The homeowner cannot have a close business or personal relationship with the real estate agent or buyer and cannot have an expectation of buying back or renting the home after the short sale or DIL closes.
* The lender may require the homeowner to make full or partial payments on the mortgage, up to 31% of the homeowner's income, subject to the lender's written policies.
* The lender can initiate or continue, but not complete a foreclosure sale while the homeowner is involved in the program.
* The buyer in a short sale can't resell the home within 90days of the purchase.
There you have it. For me, I see alot of Mandatory, rules, regulations and procedures that must be followed by both the Servicer/Lender as well as the homeowner under both programs. Personally, if you asked me to be your buyer agent in one of these deals, I would politely ask you to find another agent. For whatever it's worth. Most of these pre-approved short sales that I have seen aren't really deals at all, unless, of course you don't mind paying an at market price. Good Luck, Hope this info. helped.
Hi, Matt, I knew what you meant in your first post....
Scott, That's one of your best posts as it is very good advice, James had the same intent, lol, but participation should really be made by the well informed homeowner.
As I said in another post, the lenders have seen that investors were walking away with money they felt should have been theirs, so here we go again! As Matt mentioned, these deals may not end up being deals and we will see how it works when lenders are up to their necks in REOs later on even with taxpayer bailouts.....Bill
Loans serviced by a participating bank and/or invested or guaranteed by FNM, FM are required to participate in MHA.
(http://www.makinghomeaffordable.gov/borrower-faqs.html#3)
It seems though program particiaption may be required, all the program requires is for the bank to consider the borrower for each MHA program (HARP, HAMP, HAFA) but it is up to their discretion to have the borrower processed through that program.