Short Sale - Week 7

This is Part 7 of an on-going series documenting my most recent experience attempting to use Bank of America's Equator system to complete a short sale. You can find earlier posts in this series at:

Short Sale - Week 1

Short Sale - Week 2

Short Sale - Week 3

Short Sale - Week 4

Short Sale - Week 5

Short Sale - Week 6


December 27, 2010

• I get an email from Equator telling me the property has been rejected from the HAFA program because it is not owner occupied. This is information I gave the HAFA representative when they first suggested it be placed in HAFA. The bottom line - we have lost 2 weeks while they figured this out.
• I email the new negotiator and ask what's next. He tells me the file is back in review. Once they decide the file is ready, it will be sent to the investor for final approval. This is exactly where we were on December 10!
• I email the negotiator and ask how long this analysis will take.
• The negotiator emails me with a counter offer from the investor! The changes are minor. the seller accepts the counter and I communicate the acceptance via Equator.

December 29

• No word from the investor, so I email the negotiator and ask for an update. He replies that the investor has not gotten back to him regarding the accepted counter.
  

Analysis - Days 43 - 49:

It was very frustrating for the seller, buyer and me to have lost two weeks while the file sat in the HAFA program. I would not have been so bothered if the file was rejected because of a problem discovered while the file was being analyzed. But the rejection was due to a technical issue that had been disclosed to B of A from day 1! Why it took 2 weeks to toss the file back out is beyond me.

On the other hand, I must commend the negotiator. The day he had the file returned to him was the day we got the investor's counter offer. We're still waiting for a final acceptance from the investor, but it was exciting to finally get a response after so many weeks.

Hint:

Even when the bank seems to be wasting time with formalities, remain calm and polite. Remember that you need the cooperation of people at the other end of the phone or email to get your final goal - a closed deal!

Short Sale - Week 6

This is Part 6 of an on-going series documenting my most recent experience attempting to use Bank of America's Equator system to complete a short sale. You can find earlier posts in this series at:

Short Sale - Week 1

Short Sale - Week 2

Short Sale - Week 3

Short Sale - Week 4

Short Sale - Week 5

December 17, 2010

• The seller and I spend the morning scrambling to collect all the new and updated documents required by HAFA. By early afternoon I submit all the required documents. I call HAFA to verify they have received everything. HAFA tells me that the file will be sent to the underwriting department where the documents will be reviewed to see if the file qualifies for HAFA. This will take a minimum of two weeks.


• Late afternoon I receive an email from Equator confirming that the file is at HAFA's underwriting department.

Analysis - Days 36 - 42:

It was very upsetting for the seller to be suddenly confronted with demands for more paperwork, especially when the documents required were already submitted. It does no good to point out to the lender that the reason the documents are out of date is because they required them a month earlier and just filed them without doing the required analysis at the time they were received. It is also disconcerting to be thrust into the HAFA program. When the seller first contacted B of A to set up the short-sale, B of A should have explain that, once the paperwork is complete, the file will automatically be submitted to HAFA. This way, both buyer and seller understand what will occur, and understand that it will delay the process a minimum of two weeks.

Hint:

Recognize when things are out of your control, and have patience as the file grinds its way through the system.

Short Sale - Week 5

This is Part 5 of an on-going series documenting my most recent experience attempting to use Bank of America's Equator system to complete a short sale. You can find earlier posts in this series at:

Short Sale - Week 1

Short Sale - Week 2

Short Sale - Week 3

Short Sale - Week 4

December 10, 2010

• I send an email to Merna asking for an update on the file. I receive an email telling me the file has been referred to the HAFA program.
• HAFA, or Home Affordable Alternative Program, is part of the government's Making Home Affordable program. HAFA is designed to streamline the process of going through a short sales or foreclosures. It has some real benefits to the seller, but there are specific requirements the seller and the home must meet in order to qualify.
• I email Merna asking why the file has been referred to HAFA without notifying me or the seller.

December 15, 2010

• Merna responds to my email telling me that files are automatically sent to HAFA and I am to contact them for more information. I contact HAFA and am told that some of the documents submitted by the seller are now out of date. Of course, these documents were not out of date when submitted, but because the short sale process takes many weeks, they are now too old. Updated documents must be submitted in order for HAFA qualifications to continue.

December 16, 2010

• HAFA contacts the seller directly and explains the program. They tell her that she must fill out additional documentation and must do so today. The seller explains that she can not possibly get all the documents to HAFA that same day. HAFA tells her she has 24 hours to get the documents into the system.
• I contact HAFA and ask for a list of documents that must be resubmitted, as well as some new forms specific to HAFA. I contact the seller, provide the specific HAFA documents, and discuss the list of additional documents. She and I begin to assemble the documents.

Analysis - Days 29 - 35:


Prior to this week, I felt we were moving through the process at a reasonable pace. In a month we had submitted a deal, completed all of B of A's document requirements, and gotten an appraisal. Transferring the file to HAFA has stopped the negotiation process. There will now be a minimum of a 2 week delay before the file moves forward. However, if it is accepted into the HAFA program, and if HAFA approves the deal, the benefits to the seller are worth it. The question is, will the buyer hang around long enough to close.

Hint:

As the process drags on, communication is vital. Keep the seller and especially the buyer up to date on what's going on, even if there has been no progress.

Treasury Plans Expansion in Aid to Homeowners

Press release from the Treasury Department
March 26, 2010
TG-614

Housing Program Enhancements Offer Additional Options for Struggling Homeowners


Refinements to Existing Administration Programs Designed to Help Unemployed, Underwater Borrowers While Helping Administration Meet its Goals

WASHINGTON – Today, as part of its ongoing commitment to continuously improve housing relief efforts, the Administration announced adjustments to the Home Affordable Modification Program (HAMP) and to the Federal Housing Administration (FHA) programs. These program adjustments will better assist responsible homeowners who have been affected by the economic crisis through no fault of their own. The program modifications will expand flexibility for mortgage servicers and originators to assist more unemployed homeowners and to help more people who owe more on their mortgage than their home is worth because their local markets saw large declines in home values. These changes will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012. Costs will be shared between the private sector and the Federal Government; the Federal cost of these changes will be funded through the $50 billion allocation for housing programs under the Troubled Asset Relief Program (TARP).

Housing Policy Overview

The Administration's goal is to promote stability for both the housing market and homeowners. To meet these objectives, the Administration has developed a comprehensive approach using state and local housing agency initiatives, tax credits for homebuyers, neighborhood stabilization and community development programs, mortgage modifications and refinancing, and support for Fannie Mae and Freddie Mac. The Administration's efforts for homeowners have focused on giving responsible households an opportunity to remain in their homes when possible while they get back up on their feet, or to relocate to a more sustainable living situation. Today, mortgage rates are at record lows and, thanks in large part to these programs, more than four million homeowners have refinanced their mortgages to more affordable levels helping to save more than $7 billion annually, more than one million are saving an average of over $500 per month through the Administration's modification program, home equity increased by more than $12,000 for the average homeowner in the last three quarters last year and the economy is growing.

Even with this success, we continue to see challenges. Servicers were slow to implement HAMP, resulting in a slow start for the program. Recent improvements in the program have accelerated the pace of modifications, and the adjustments announced today will improve performance. But our strategy to address the crisis must evolve because our challenges have also evolved.

Our housing initiatives must balance the need to help responsible homeowners struggling to stay in their homes, with the recognition that we cannot and should not help everyone. The President has said: "We can't stop every foreclosure." And in fact, we can't maintain the balance described above if we assist every borrower. For example, investors and speculators should not be protected under our efforts, nor should Americans living in million dollar homes or defaulters on vacation homes. Some people simply will not be able to afford to stay in their homes because they bought more than they could afford. Instead, the Administration must focus on providing responsible homeowners opportunities to obtain a modification or to refinance and prevent avoidable foreclosures and, when necessary, must facilitate the transition to a more sustainable housing situation. The adjustments announced today are tailored to accomplish these goals by helping a targeted group of borrowers.

Eligible homeowners for modifications under HAMP must, for example: live in an owner occupied principal residence, have a mortgage balance less than $729,750, owe monthly mortgage payments that are not affordable (greater than 31 percent of their income) and demonstrate a financial hardship. The new flexibilities for the modification initiative announced today continue to target this group of homeowners.

The FHA refinance options being announced today will provide more opportunities for lenders to restructure loans for some families who owe more than their home is worth. This is a voluntary program for lenders and homeowners. The population eligible for a FHA refinance must be current on their mortgage. This rewards responsible homeowners and creates stabilizing incentives in the housing market.

Taken together, the Administration's broad housing initiatives and the new flexibilities announced today will offer a second chance to millions of responsible, middle-class American families struggling to stay in their homes and will help to stabilize our households, neighborhoods and communities.


Background on Housing Program Initiatives to Date
The Administration has taken a broad set of actions to stabilize the housing market and help American homeowners. These efforts are having an impact on our housing markets – we are seeing signs of stabilization. Looking back to over a year ago - stress in the financial system had severely reduced the supply of mortgage credit, limiting the ability of Americans to buy homes or refinance mortgages. Millions of responsible families who had made their monthly payments had fulfilled their obligations saw their property values fall, and found themselves unable to refinance at lower mortgage rates.

In February 2009, less than one month after taking office, President Obama announced the Homeowner Affordability and Stability Plan. As part of this plan and through other housing initiatives, the Administration has taken the following actions to strengthen the housing market:

Actions Supporting Market Stability and Access to Affordable Mortgage Credit

· Provided strong support to Fannie Mae and Freddie Mac to ensure continued access to affordable mortgage credit across the market;

· Together, Treasury and the Federal Reserve have purchased more than $1.4 trillion in agency mortgage backed securities, which have helped keep mortgage rates at historic lows, allowing homeowners to access credit to purchase new homes and refinance into more affordable monthly payments; and

· The FHA has played an important counter-cyclical role, providing liquidity for housing purchases at a time when private lending has declined.

Actions Helping Homeowners Purchase Homes, Refinance and Modify Mortgages to More Affordable Payments, Prevent Foreclosures and Stabilize Communities

· Launched a modification initiative to help homeowners reduce mortgage payments to affordable levels and to prevent avoidable foreclosures;

· Supported expanding the limits for loans guaranteed by Fannie Mae, Freddie Mac, and FHA from previous limits up to $625,500 per loan to $729,750;

· Expanded refinancing flexibilities for the Fannie Mae and Freddie Mac loans, particularly for borrowers with negative equity, to allow more Americans to refinance;

· Launched a $23.5 billion Housing Finance Agencies Initiative which is helping more than 90 state and local housing finance agencies across 49 states provide sustainable homeownership and rental resources for American families;

· Supported the First Time Homebuyer Tax Credit, which has helped hundreds of thousands of responsible Americans purchase homes.

· Through the Recovery Act is providing over $5 billion in support for affordable rental housing through low income housing tax credit programs and $2 billion in support for the Neighborhood Stabilization Program to restore neighborhoods hardest hit by concentrated foreclosures; and

· On February 19, 2010, the Administration announced the $1.5 billion HFA Hardest Hit Fund for housing finance agencies in the nation's hardest hit housing markets to design innovative, locally targeted foreclosure prevention programs.

Historically low mortgage rates along with expanded refinancing flexibilities for Fannie Mae and Freddie Mac loans have helped more than four million American homeowners with Fannie Mae and Freddie Mac loans to refinance, saving an estimated $150 per month on average and more than $7 billion in total. HAMP has provided more than 1 million struggling homeowners a second chance to stay in their homes – with each homeowner in a modification saving more than $500 per month on average.

Together, these initiatives are having an impact – strengthening the housing market, helping responsible homeowners prevent avoidable foreclosures and rebuilding communities and neighborhoods. Today mortgage rates remain at historic lows – the primary interest rate is now about 5 percent, lower than at any time in the three decades before the crisis. We are also seeing encouraging signs in housing indicators – home prices and the pace of home sales have stabilized in recent months.

HAFA Begins April 5

If you are considering getting involved in a short sale, either as a seller or a buyer, you should be aware that the Home Affordable Foreclosure Alternatives (HAFA) program starts on April 5.

HAFA provides additional options to avoid costly foreclosures and offers incentives to borrowers, servicers and investors who utilize a short sale or deed-in-lieu (DIL) to avoid foreclosures. HAFA alternatives are available to all HAMP-eligible borrowers who: 1) do not qualify for a Trial Period Plan; 2) do not successfully complete a Trial Period Plan; 3) miss at least two consecutive payment during a HAMP modification; or, 4) request a short sale or deed-in-lieu.

In a short sale, the servicer allows the borrower to list and sell the mortgaged property with the understanding that the net proceeds from the sale may be less than the total amount due on the first mortgage. Generally, if the borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the servicer - provided title is free and clear of mortgages, liens and encumbrances. With either the HAFA short sale or DIL, the servicer may not require a cash contribution or promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower.

HAFA simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation.
Quoted from Making Home Affordable website

It's this last paragraph the will be most directly addressed come April 5. Here are the major changes that will take effect:

Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home;

Uses borrower financial and hardship information already collected under HAMP;

Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds);

Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6%);

Requires borrowers to be fully released from future liability for the first mortgage debt and, if the subordinate lien holder receives an incentive under HAFA, that debt as well (no cash contribution, promissory note, or deficiency judgment is allowed);

Uses a standard process, uniform documents, and timeframes/deadlines;

Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to a $1,000 match for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders; and

Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

To help you better understand HAFA and its guidelines, The National Association of Realtors has released a brochure about the Home Affordable Foreclosure Alternatives Program.

You can see a text version of this brochure here.

Help Understanding New Short Sale Guidelines

On April 5, 2010, the U.S. government will implement the Home Affordable Foreclosure Alternatives Program (HAFA). Part of the Home Affordable Modification Program (HAMP), HAFA helps home owners who are unable to retain their home under HAMP by simplifying and streamlining the use of short sales and deeds-in-lieu of foreclosures. Home owners must meet certain requirements to participate, and incentive payments are provided to home owners and servicers.

To help you better understand HAFA and its guidelines, The National Association of Realtors has released a brochure about the Home Affordable Foreclosure Alternatives Program.

You can see a text version of this brochure here.