HAFA 90 day hold?

Question

Does anyone have a clear picture how the HAFA 90 day hold will affect those of us who use transactional funding?

How can we pre-determine if a property falls under the new HAFA guidelines ahead of time?

I'm not a fan of saying - "Oh well, you have THAT type of loan so we can't work with you." - Looks like I may have to.

Maryann L. · Answer

Dan,

Thank you for breaking this down.  Excellent job analyzing this MESS they have people believing is supposed to be a great program.

I don't think many homeowners I've met would qualify for this.

Maryann L. · Answer

I believe the homeowner has to elect to enter the program.  The guidelines are questionable and open for interpretatoin in my opinion.
"Their SSA requires that the deadline for the homeowner to find a buyer and complete the transaction be not less than 120 calendar days from the date the SSA is mailed to the homeowner."

WOW - that blows my mind.  If a homeowner agrees to a short sale and wants to get the ball rolling, most that I've dealt with want the transaction done sooner than later. Why would they want to wait 4 months if we could get it done in 3?  I have no idea why they would put a restriction on how SOON they could get it done.

If a homeowner has a 2nd note, it seems like there is no benefit to even applying for this program.  There is not the same gaurantee of no deficiency. "Lenders of HELOCs and other subordinate liens may be allowed to keep a limited portion of the proceeds (up to $3,000 each) of a short sale, with the first-lien lenderâ€™s approval. "  Here's the problem.  The second doesn't HAVE to agree to this making the program usless to apply for. I'm sure everyone here on this board has had a second that was a bitch to deal with and wanted an extraordinary amount.  Thankfully they are far and few in between, but the second can go after the homeowner for the deficiency.
"The original lender may not be held responsible if any subordinate lienholders decline to participate and decide to sue the borrower for the amount of their unpaid debt."
This is BEAUTIFUL!!  So this HAMP program wastes everyone's time because a 2nd decide not to participate, goes after the homeowner for the deficiency and the 1st can wash their hands of it!!!!!!!

I'm assuming the FIRST is paying the full 6%....does the 2nd have input to that?  What if the second said no?  So commission for the agent is not protected I'm assuming if there is a second note.

So far NOT ONE person I'm working with right now would qualify.  No one make the 31%, and 90% of the homeowners I'm working with have a 2nd note

Dan Favor · Answer

The HAFA (Home Affordable Foreclosure Alternatives)Program is coming and will take effect on April 5, 2010. It is essential that you know why it is not a good program and why, if you are a seller, you should throw that agreement in the trash! (this is the PG version of what I really feel you should do with it!!)

Before I go on, you need to know I have spent many hours in webinars and seminars which were ran by Wells Fargo, Bank of America, Freddie Mac and a few nationally recognized attorneys who specialize in short sales on top of plenty of time reading the guidelines and contract myself.

Most of what I will include below is my professional opinion based on the information given to me by the above parties. I feel it is important to share the information I learned to help you make a more informed decision. Ultimately, you need to take the guidelines and contracts (they call it the Supplemental Directive 09-09), which I've included below, to your own attorney (not just any attorney but one who specializes in short sales) and make an informed decision. Click here for a free list of questions you'll want to ask to be sure any professional you are seeking advice from actually has significant short sale experience.

Supplemental Directive 09-09 - First of all before I begin it is first important to point out how you know if you are even eligible for the program. You will need to meet the following criteria:

1. Your loan must be a non GSE loan - Loans that are not owned or guaranteed by Fannie Mae or Freddie Mac (click on either of the previous links to find out if your loan is a Fannie or Freddie loan)

2. The servicer of your loan (who you make your payments to) must have executed a servicer participation agreement and related documents (SPA) withFannie Mae in its capacity as financial agent for the United States (as designated by Treasury) to participate in HAMP on or before December 31, 2009

3. A loan must be HAMP eligible and meet the other requirements to be eligible for incentive compensation under HAFA

4. Servicers must evaluate a borrower for a HAMP modification prior to any consideration being given to HAFA options

5. Borrowers that meet the eligibility criteria for HAMP but who are not offered a Trial Period Plan, do not successfully complete a Trial Period Plan, or default on a HAMP modification should first be considered for other loan modification or retention programs offered by the servicer prior to being evaluated for HAFA

6. The property is the borrowerâ€™s principal residence - no second homes or investment properties

7. The mortgage loan is a first lien mortgage originated on or before January 1, 2009 - if you have a second or third mortgage or any other lien, they are not eligible. You will be responsible for getting any additional liens released on your own.

8. The mortgage is delinquent or default is reasonably foreseeable

9. The current unpaid principal balance is equal to or less than $729,750 - no jumbo loans

10. The borrowerâ€™s total monthly mortgage payment (as defined in Supplemental Directive 09-01) exceeds 31 percent of the borrowerâ€™s gross income

Now on to the Highlights, der, uh, I mean Lowlights:

1. Servicers, in accordance with investor guidelines, determine if a short sale or DIL (deed in lieu of foreclosure) is in the best interest of the investor, guarantor and/or mortgage insurer. It matters not what is in your sellers best interest but what is in the best interest of the investor/lender/insurance companies!

2. By signing the SSA, you are agreeing not only to a short sale but also to a deedâ€inâ€lieu of foreclosure if a short sale is not successful - This is a huge gotcha and the biggest reason why I would not sign or enter into a HAFA agreement!

3. A fixed termination date of not less than 120 days, after which, the servicer may or may not agree to extend it for up to a year. - On the surface this does not seem all that bad unitl you read #4 below.

4. When the seller signs the SSA (HAFA short sale agreement) they are agreeing up front to a DIL (see #2 above). The investor is obligated to accept a DIL in accordance with the terms of the SSA if the term of the SSA expires without resulting in a sale of the property - This means come day 120 the lender can exercise and enforce a DIL because the seller already agreed to it in writing. For those of you who don't know, a DIL is nothing more than a volunteered foreclosure. It will show on your credit as a foreclosure. This is not a benefit to you but it is to the lender because they get the property back in their possession faster thereby saving them money compared to making them go through a judicial foreclosure process.

5. Servicers may amend the terms of the SSA in accordance with investor requirements. - Talk about a sentence that opens the flood gates for lenders to do what they please!

6. Sellers will have to continue to pay a portion of their mortgage payment. They will be required to pay, during the term of the SSA, an amount that must not exceed 31% of the borrowerâ€™s gross monthly income. - Sellers who miss payments will be in default of the agreement and a DIL can be immediately pursued and enforced!

7. The offer price will be dictated by the lender using the 90 day "as-is" BPO value. - The servicer does not have to agree to additional valuation methods. - Sellers better pray they get an experienced BPO agent because if they over value your property and it does not sell within 120 days because it is overpriced, you just gave your property to the bank (see DIL #2 and #4 above)

Don't fret though as there is ONE good thing about HAFA. You can opt out of this program at any time! 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 means you can elect to perform what is now being referred to as a "proprietary" or "classic" short sale (or a non HAFA short sale).

If you have help from a qualified experienced short sale professional, they will know all you have to do is put in your short sale package cover letter the words, "THIS IS TO BE A NON HAFA SHORT SALE." They will also have many ways to help you avoid having a foreclosure on your record, avoid agreeing to a DIL, avoid agreeing to deficiency judgements and avoid signing promissory notes.

Bottom line, HAFA is great for the lender/servicers but not so much for you, the homeowner/seller. I predict HAFA will be another massive failure just as HAMP has been. This program will be a good fit for very few homeowners, if any at all.

The sooner you realize lenders control our politicians and they both falsely act as if their programs will work better for consumers while in reality they have figured out, in advance, how they will ultimately improve their own position and bottom line, the better off you will be! KNOW YOUR RIGHTS!

Disclaimer: While attempts have been made to verify information provided therein, the author does not assume any responsibility for errors, omissions, or contradictory information contained in this document. This document is not intended as legal, investment or accounting advice. The reader of this blog assumes all responsibility for the use of these materials and information.

10 Comments

BREAKING NEWS FOR SHORT SALES - FHA WAIVES 90 DAY ANTI FLIP RULE!
01-15-10Kevin Kravcak
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Office: (888) 339-8462 x706
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This just in: FHA announces they will waive the 90 day anti flip rule for short sale and reo back to back transactions!

Last week I wrote a blog about the legalities of these transactions, are back to backs legal, and informed you all of the legitimacy of them. FOr all you flippers and rehabbers out there the news could not be any better!

Finally, the powers that be are actually doing something to help us churn through all this distressed inventory. I predict many more lenders and organizations will fall in line like dominoes by the end of 2010.

Just make sure you follow the guidelines please as we don't need a few rotten apples to spoil the bunch.

BREAKING NEWS!! - FHA REMOVES 90 DAY ANTI FLIP RULE!! THIS IS VERY VERY GOOD NEWS -http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

Happy Home Hunting!!

Disclaimer: While attempts have been made to verify information provided therein, the author does not assume any responsibility for errors, omissions, or contradictory information contained in this document. This document is not intended as legal, investment or accounting advice. The reader of this blog assumes all responsibility for the use of these materials and information.

Hope you don't mind I moved this over!

Mark Yuschak · Answer

Does anyone have any more updated information about HAFA?  More specifically, is it a program which the seller can choose to participate?

Dan Favor · Answer

The HAFA Mortgage Program HAFA - Home Affordable Foreclosure Alternatives
In light of the rising number of property foreclosures in the United States, the government has expanded the Home Affordable Modification Program (HAMP) to include provisions and incentives for servicers to allow short sales or deeds-in-lieu as positive options for eligible homeowners in default who wish to avoid foreclosure. The new program is called Home Affordable Foreclosure Alternatives (HAFA).

Participation in HAFA cannot save the homeowner from losing his or her property, but it can eliminate the effects of a foreclosure on the homeownerâ€™s credit. Financial incentives for participation in the program include a $1,000 servicing bonus for lenders and a $1,500 relocation bonus for displaced homeowners.

HAFA is designed for homeowners who have applied to HAMP for assistance but have had no success with their loan modification program. To participate in HAFA, homeowners must still meet HAMPâ€™s eligibility criteria (principal residence, first-lien mortgage, serious delinquency, unpaid balance under $729,750, and a mortgage payment over 31 percent of gross income).

Homeowners must be considered for HAFA within 30 days if they cannot meet HAMPâ€™s requirements or if they specifically request consideration for HAFA. However, the homeowner only has 14 days to respond to a written notice that HAFA may be available to them, giving the lender time to meet their 30-day deadline.

As with other short sales and deeds-in-lieu, the lender or loan servicer of the primary mortgage must approve of the transaction and conduct their own independent appraisal. Under HAFA, however, they must also agree to accept the proceeds from the sale of the house as payment in full, waiving their right to collect the balance of the loan from the homeowner.

It is up to the lender or servicer of the first-lien mortgage whether they or the homeowner negotiate with any subordinate lienholders. Lenders of HELOCs and other subordinate liens may be allowed to keep a limited portion of the proceeds (up to $3,000 each) of a short sale, with the first-lien lenderâ€™s approval. These funds are part of an incentive program for subordinate lienholders to waive their right to collect the balance due on their loans. The original lender may not be held responsible if any subordinate lienholders decline to participate and decide to sue the borrower for the amount of their unpaid debt.

HAFAâ€™s Short Sale Agreement (SSA) has certain stipulations for all parties involved. Their SSA requires that the deadline for the homeowner to find a buyer and complete the transaction be not less than 120 calendar days from the date the SSA is mailed to the homeowner. The lender has the option of extending this deadline another 245 calendar days, for a total term of 12 months. The SSA also mandates that a HAFA transaction must be â€˜arms-lengthâ€™, and that the end buyer must agree to hold the property for at least 90 days after closing. Finally, the SSA gives the listing real estate agent the right to an undiscounted 6 percent commission at closing.

A short sale is any sale of property, usually during the foreclosure process, in which the lender(s) agrees to accept less than the balance due on the mortgage(s) or lien(s) in order to avoid the cost of foreclosure. Per HAFA requirements, the primary lender may not pursue the homeowner, but the secondary lenders do not have to agree to that provision. Assuming that they agree to the short sale in general, they can forego the financial incentive to waive collection rights and continue to pursue the homeowner for their own balances due, in which case their recovery options are then covered by state law. The vacancy date is determined by the terms of the closing.

Unlike a short sale, a deed-in-lieu simply allows the homeowner in default to transfer the deed to the property back to the lender in exchange for partial or full payoff of the mortgage. The vacancy date must be at least 30 days after the deed-in-lieu agreement is signed.

In either case, HAFA requires that the lender agree to suspend all foreclosure sales in good faith, pending the outcome of either transaction. In the case of a short sale, the lender also must agree to pay the administrative closing costs.

The Department of the Treasury, which authorizes all programs under the Making Home Affordable umbrella, has designated Freddie Mac as its compliance agent.

The HAFA program is set to begin on April 5, 2010. Servicers may initiate a HAFA transaction earlier in 2010 under certain conditions. As of this writing, all HAFA agreements must be finalized and signed by December 31, 2012.

Please download the Treasury Departmentâ€™s Supplemental Directive 09-09 for more specific details and samples of forms to be used in processing HAFA transactions.

Notice "end buyer" above, (may have double meaning,) Also hearing if the seller wishes not to participate in the HAFA contract they can opt-out in writting on cover letter or hardship letter.In another thread in SS BP their is some compelling reasons why HAFA may not behoove them.

Ted Akers · Answer

The 90 day hold does pose issues with traditional shorter term Transactional Funding.  There may be some solutions.  The program is required for GSE's, but is an opt-in program for banks.  We will probably not see the list of which banks have chosen to participate until or near the effective date.  My read is that if the bank opts-in all short sales under $729,250 loan balance will fall under the HAFA rules.