Oh boy, here we go – another set of guidelines!!!!! Do you ever feel like your head is spinning around and around and around? Here is the link for now for a summery page. I will supply more information later. Think I have used over a reem of paper so far with HAFA guidelines!
Well, well, well … Fannie Mae is way ahead of the game and put their HAFA Program together and announced the 22 page “Fannie Mae Announcement SVC-2010-07” on June 1, 2010, yet the program is not mandated to be implemented until August 1, 2010. Servicers are encouraged to implement the Fannie Mae HAFA program earlier than that date. The Fannie Mae HAFA program sunsets on December 31, 2012, meaning a servicer must receive fully executed required documents before that date to be eligible.
In reviewing the Fannie Mae HAFA servicing guide, many of the guidelines are comparable to the Making Home Affordable HAFA Program for non-GSE servicers, but I did notice there are some huge differences, which include:
• Real estate agents representing the seller/borrower will be held to a much higher accountability standard
• All home retention options must be exhausted
• 60 day rule for properties in active foreclosure
• Servicer must continue to pursue a pending foreclosure while evaluating a borrower’s eligibility
• If in active BK the borrower must be considered for a Fannie Mae HAFA short sale or DIL if requested by borrower, borrower’s legal counsel or BK Trustee
• BPO (Broker Price Opinion) or appraisal information cannot be disclosed to the borrower
• If a borrower enters into a Fannie Mae HAFA short sale agreement of HAFA DIL Agreement after foreclosure proceedings have begun, the servicer must consult with legal counsel to determine if the required monthly payments can be accepted without affecting the pending foreclosure
• Fannie Mae is currently working with mortgage insurers to obtain “delegated authority” to bypass approval by the mortgage insurers
Fannie Mae HAFA Program Summary
The Fannie Mae HAFA program simplifies and streamlines the use of short or “pre-foreclosure” sale and deed-in-lieu of foreclosure (DIL) options by incorporating the following unique features:
• Complements HAMP by providing alternatives for borrowers who are HAMP eligible (including borrowers facing imminent default);
• Utilizes verified borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis;
• Allows the borrower to receive pre-approved short sale terms prior to the property listing;
• Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement;
• Releases the successful HAFA borrower from future liability for the debt;
• Uses standard processes, documents, and timeframes;
• Provides financial incentives to borrowers, servicers and subordinate lien holders.
Borrower Incentives
• Short sale or DIL – $3,000 to assist with relocation expenses
In most circumstances, the borrower will receive funds at closing of a short sale or within 5 days after the servicer’s acceptance of a DIL, provided the borrower has vacated the property and left it in acceptable condition.
Fore more information, download the FANNIE MAE Servicing Guide Announcement SVC-2010-7. And of course, if you have any questions or would like to schedule your FREE consultation, please email or call anytime! We understand and are here to help!
I attended a HAFA webinar today and the presenter stated he spoke with the US Treasury Department yesterday and was told FANNIE and FREDDIE will more than likely have their HAFA type short sale program up and running June 1, 2010, 5 months earlier than mandated. This is great news! Contact us if you need help HAFA or short sale help!
After 7 months of research and assisting the Senior Producer for 7 on Your Side with Michael Finney, Channel 7 News aired a possible foreclosure and short sale scam preying on desperate homeowners. Be sure to watch the video clip. It was with great pleasure I was able to assist in exposing the bad guys!
Making a Decision from a Business Point of View
For the past 2 years I have met with homeowners who feel an extreme moral obligation to keep their home and take every last penny they have to make the mortgage payment. Yet, my wise son at age 25 put it this way a 2 years ago; “Letting one’s house go is a business decision” – well said young man! I also agree. One can repair their credit, but recouping hundreds of thousands of dollars is an entirely different story!
Just last week I met with a woman who is so attached to her home and is $400,000.00 upside down, cannot afford the payments as they are today and is out of money. Yet I gave her a sliver of hope that her and her husband can purchase again in 3 years if her credit score is restored (easy to do with the correct coaching and one’s willingness to do what needs to be done). She did come to grips with the reality due to the fact that she now had some correct information, she has a game plan and more than anything she and her family now have a glimmer of hope for their future.
Making the right decision is hard enough, but making SOME TYPE of decision will free you from sleepless nights and the daily wrenching in your stomach. If you can remove your emotions for a moment and look at your financial situation, most will realize short selling or foreclosing on the home really might be in your best interest in the long run. But just like any good business decision, getting the right coaching from professionals must be part of the plan. These professionals include: an experienced real estate agent, a tax professional and legal consul.
What does this all have to do with a loan modification? Simply, a modification is not always the “Best Business Decision” for a homeowner. The waiting game one has to endure is agonizing enough and then when you get the result, most are not happy.
The only positive word I can say about modifications is if you are one of the lucky folks who gets a modification payment that is less than or equal to what you would pay for rent for the same home, then it might be a good idea to stay in the home. But you must also consider how far underwater you are. When working with homeowners we will give a current fair market value of the home and show them how many years it will take for appreciation to catch up with their current loan balance. Most often modifications just delay the real problem.
I have never been an advocate of modifications because it freezes the natural process of home ownership. For instance, if you are $200,000 underwater, modify your loan and if it takes 9 years for appreciation of your home to catch up with the loan balance, you are a sitting duck. During that 9 year stint you cannot sell or refinance. If you have 50% of an areas homeowners as sitting ducks the market will stall out. Homes will not continue to appreciate at a normal pace because everything is at a stand still. And what if your home does not appreciate after 9 years – now what???? Just some food for thought!
Before you make any decision, get all the information and be sure to keep your business hat on when assessing the big picture.
You can contact the whatsHAFA.com Team for a personal assessment of your situation. More than anything we want you to have a little bit of hope for your families future!
In talking to 2 companies that contract with major mortgage servicers, when asked when the HAFA Offer Letters where to start going out, I was informed the mailings began last week.
Borrowers and homeowners – if you recieve a HAFA Offer Letter from your bank servicer we would sure like to hear about it from you! You can contact us anytime!
UPDATE: May 20, 2010 – I attended a Bank of America training for short sales and HAFA. It was confirmed 2 third party companies have mailed letters to homeowners for Bank of America. I have also received emails from consumers that they also have received letters. Let the games begin!
Over the past year and a half, I have received dozens of calls from other realtors and homeowners who have actually received loan modifications from their banks/servicers and are so excited about the terms. But wait …. did you REALLY understand what you were reading? Hmmmm, probably not, because you more than likely never read your original loan documents!
For instance, I have heard many times, “the bank forgave $150,000 of my loan”. Great, sounds like a super deal, but we know that Wachovia is about the only bank actually forgiving principal.
I will ask the homeowner to send me the modification agreement and bigger than snot, I read through the agreement and that bugger of a word pops out at me …. DEFER! Per the HAMP or Home Affordable Modification Program, the banks have a “waterfall system” that allows them to change the loan term to 40 years with a 2% floor on rate. If the borrowers PITI is still not under the 31% guideline then the bank will start “deferring” principal until they can get to the 31% DTI or debt to income ratio. Defer does not mean forgiveness – it means you have to pay it sooner or later. If you really take the time to read the terms of your modification you might be surprised.
Another concern I have is the right the borrower is giving up for any recourse against the bank. The private MBS (mortgage backed securities) that have been sliced and diced into CDO (collateralized debt obligations) tranches and the original promissory note was never properly assigned to the new mortgage holder (beneficiary) leaves a bit of a loop hole for the borrower. Court cases and rulings have been popping up like crazy in Florida and maybe you have heard of the “Show me the Note” court case where the courts ruled in favor of the homeowner because the bank could not produce the proper documents to show that the party foreclosing actually had the right to do so. I just hate seeing the banks continue to get the upper hand when all is said and done. So BEFORE you sign any loan modification, spend a few bucks and have an attorney or your experienced loan officer review the modification terms.
If you have questions about your modification or about HAFA and short selling, please be sure to contact us! We are always here to help!
I have one complaint when it comes to HAFA, short sales, foreclosure and credit scores – everyone seems to have an opinion and does a little bit of exaggerating when it comes to the damage a foreclosure or short sale will do to your credit. I have some REAL LIFE examples of credit score changes:
1. FORECLOSURE
Age 24
1st and 2nd deed of trust foreclosed
7 months of rolling 30 day mortgage lates
No other derogatory hits to credit
740 mid score at purchase
Scores 2 months after foreclosure – 613, 612, and 632 – A SCORE DROP OF 128 POINTS
Principal was offered a credit card at a major bank just 2 months after the foreclosure with a credit limit of $2,000.00
696 mid credit score 8 months after foreclosure – A SCORE DROP OF 44 POINTS 8 MONTHS AFTER FORECLOSURE
2. SHORT SALE
Age 36 – 1st mortgage only and no mortgage lates
Mid 700 score prior to short sale reporting
680 score 7 months after short sale – A 60 POINT SCORE DROP
This borrower actually purchased a home with FHA financing 7 months later
3. FORECLOSURE ON 7 PROPERTIES
Age 50
Total of 7 delinquent first mortgages foreclosed on and 10 second mortgages that have been charged off and sent to collections
Anywhere from 7 to 18 months of rolling mortgage lates on all loans
10 months of credit card rolling lates.
No lates on 7 existing mortgages and 3 credit cards
Mid score prior to going delinquent – 746 with a total of 5 maxed out credit cards and a total of 26 1st and 2nd mortgages (I know – scary)
No derogatory marks on credit report prior to going delinquent.
498 Score 1 year and 8 months after first going late – A SCORE DROP OF 242 POINTS WITH 7 FORECLOSURES, 4 CHARGED OFF CREDIT CARDS, 10 CHARGED OFF MORTGAGES AND 3 REMAINING MORTGAGES STILL IN ACTIVE DEFAULT
Many people are being scared in to doing a short sale when maybe a foreclosure is in their best interest. I keep reading on sites that the hit to credit for a foreclosure can be 300 points.
My point is to make sure you get the correct information before making the final decision of a foreclosure, short sale or deed in lieu of foreclosure. There are other factors other than your credit score when it comes to deciding what is best for you.
One final note: there are many factors that affect a person’s score – age, revolving credit, debt to high limits, how long accounts have been open and much more.
I received a call from one of my long time fellow realtors and good friend last week. We spent most of our conversation sharing war stories of short sales and the issues with the banks!
We finally got down to business and the subject at hand was my fellow realtor had a client who was very worried that the bank world come after him for the deficiency difference on the first mortgage after the short sale closed. Of course there was no language in the first mortgage short sale approval stating that they would accept the short with “full release of liability.”
Which brings us to an interesting issue! When a bank shorts on a 1st mortgage there can only take one of two options; they issue a 1099-C OR they pursue the borrower with a collection or legal proceeding for the difference. THE BANK DOES NOT GET BOTH! Now, that does not mean the banks do not try to sneak in a collection or two for the deficiency.
I was so concerned about what is happening in California that I picked up the phone and called the legal department of the California Association of Realtors. The nice attorney on the other end stated that the right to deficiency was not clear because there was no evidence of case law to support the issue. She also told me that the positive news was the new HAFA guidelines, which states that if a servicer agrees to a short sale through a HAFA short sale that all rights to deficiency are waived.
We shall see if this new government program solves the woes of short sales!
If you need assistance with deciding what the best foreclosure alternative is for you and your family, be sure to contact us at mward@kw.com!
Well, I know the HAFA program inside and out and I am submitting my first HAFA short sale package to Wells Fargo. My sellers have a Wells first mortgage (non Fannie or Freddie) and a HELOC Wells Fargo second mortgage. Of course, each short sale package goes to different loan departments.
My sellers are not delinquent but will soon be. They are out of money, husband will be losing his County job June 1, 2010 and their debt to income ratio calculated at the stated guideline limit of 31% leaves them with a payment of $2000 more a month than what they would qualify for (of course not using hubby’s income as it will soon be going away.)
The whatsHAFA.com Team has a clean and thorough package including a Federal 4506-T (not supposedly required with the revised HAFA guidelines issued 3/26/2009 – but better safe than sorry), the RMA borrower form completed form, estimated HUD and the normal required documents.
So keep coming back for an update of the process! Let’s see if government HAFA intervention really works this time around! I truly believe in my heart of hearts that the HAFA Program will work as it is a system that makes sense with some accountability by the banks or 3rd party companies handling the short sales and it appears to much more thorough with the guidelines. Yet, we still have the issues of getting a junior lien holder to cooperate! So hold on to your hat – this could be a wild ride!
If you have questions or are in need of help making a decision whether to short sell, modify your loan, ask for a deed in lieu of foreclosure or possibly even refinance, give the whatsHAFA.com Team a call – we can help give you the right information to make a good decision for you and your family!
Update: May 5, 2010
Both the 1st and 2nd mortgage have already been assigned a negotiator for the short sale approval. The 2nd lien holder did inform us they are not required to comply with HAFA guidelines and for us to expect the homeowners to make a contribution to satisfy the lien.
Just as I expected – the 2nds are going to be the thorn in our sides with HAFA! More info when we get it!
