HAFA – Good and the Bad
HAFA stands for Home Affordable Foreclosure Alternatives. It is one of many government programs to help distressed homeowners avoid foreclosure. But it is only available to certain borrowers. And your servicer has to agree to the terms of HAFA as well. The coordination of all these parties is often the most difficult part of dealing with a short sale. Because more often than not, all of these parties aren’t on the same page and the deal falls thru. The more experience you have with short sales, the more you’re able to coordinate with the parties and keep everyone in line.
Here’s the Good and Bad of the HAFA program.
Good:
- The Seller is released from any Deficiency Balance on the loan.
- The Seller will receive $3,000 in Relocation Assistance.
- The Junior or 2nd mortgage holder may receive up to $8,500 to satisfy the lien.
- If a sheriff’s sale is scheduled, the HAFA agreement will postpone or suspend the sale.
Bad:
- You do have to qualify for the program, and your loan has to meet certain criteria as well.
- If the property is not sold within the period of the HAFA Agreement, the lender requests the seller to move to a Deed-In-Lieu situation, which is not the best option.
- If your hardship situation is moderate, the lender might force you into a Loan Modification, when you actually need to sell the property.
- The seller is forced to hold on to the property for 90 days.
Click here to go to the HAFA homepage.
These are just a few observations I’ve made after working on many short sales over the past five years. You should consult your attorney for further advice on the subject.
Zach Shepard
The Government-Run Mortgage Giants Finally Awaken!
Thurs, 4/19/12
Fannie Mae & Freddie Mac, the two government controlled mortgage giants, have finally issued new guidelines to help speed up the short sale process. Now homeowners can expect a decision on the short sale in 30 to 60 days. It was a long time in coming.
The FHFA, which oversees both mortgage companies, issued new guidelines Tues that set minimum response times that servicers must abid by because of the new Servicing Alignment Inititive that was rolled out last fall. These guidelines are due to go into effect by June 15, 2012, but all servicers are being encouraged to begin implementing the new requirements sooner.
Click here to view the Freddie Mac Bulletin.
- Zach Shepard
UPDATE – Independent Foreclosure Review
According to DS News, a default servicing and real estate news source, only 121,000 homeowners out of 4.3 MILLION that were potentially harmed in the foreclosure process have applied to the review board to have their foreclosure situation reviewed. That’s less than 3% of all homeowners who are eligible for compensation or remediation for bad foreclosure practices.
From DS News directly,
“When consultants do find that a borrower suffered financial harm because of actions by his or her servicer, the servicer will be required to provide remediation, which may range from reimbursement of lost equity, repayment for expenses plus interest, or repealing a foreclosure. “There are no caps or limits to the amount of compensation that will be paid out or remediation actions that will be offered.”
If you believe you qualify to have your foreclosure situation reviewed, please go to the Review Board’s website here.
The review is open till July 31st to accept applications.
- Zach Shepard
Sticking Your Head In the Sand… (Don’t Do It!)
Sticking Your Head In the Sand… (Don’t Do It)
AKA: Find Out All Your Options
How much mis-information and in-accurate info do you think is out there regarding short sales? For homeowners looking at the short sale option, there is a title wave of information… good, bad and completely wrong. Not only is this bad info available online, but from friends and relatives too.
Here’s the latest horror story…
I followed up with a potential client several weeks ago in early February to find out if she was able to complete her short sale back in the fall. The homeowner had been a referral from a couple whom we had helped to close their short sale back in the summer. When I first spoke to the referral client, we went back and forth on email a couple of times over a few weeks, but we never actually were able to talk about her situation, and what, if anything, she was doing to get out of it, whether short sale or otherwise. The last email I sent to her was probably in late Oct. I never received a response.
When I followed up with her in early February this year, she returned my email, albeit a few days later. In her reply email, she stated that she never did anything with her condo and that she let it go to the sheriff’s sale and she lost it… It turns out that she had ‘talked to someone else and was told it was “too late” for me’ to do a short sale because the house had a ‘sale date’ in January.” She wrapped up her email by saying that her house did go to the sheriff’s sale in January, and now she was looking for a place to move to…
Keep in mind, she was told in October that she had until Jan before the sheriff’s sale date. That’s 2.5 to 3 months to figure something out! It was NOT “too late!” But alas, she didn’t do anything. That’s a tough story to hear.
It makes me wonder, who did she take that advice from? Was it an attorney? A Realtor possibly? Was it someone who specializes in the distressed property arena? I’m willing to bet it was probably not. She took advice from one person, then stuck her head in the sand.
Don’t be that person. If you’re in a difficult position financially, you owe it to yourself to do anything and everything possible to get out of it. She made a decision a decision that will follow her for the next 10 years. The foreclosure will go on her public record and her credit is severly damaged. And not only that, but she has no idea what her lender is going to do with the loss on the loan. If it was her primary residence, the chances are slim that they’ll do anything, but by sticking your head in the sand, you give up all ability to control any of the terms of the deal. You give up all options.
Be careful who you take advice from. You’ve heard what they say about free advice, right? It’s usually the most expensive kind… It was in this case.
- Zach Shepard
Independant Foreclosure Review period extended till July 31st, 2012
For homeowners who believe they were wrongly foreclosed on, the Federal Reserve along with several other government agencies, have extended the period of time for an independent review of your foreclosure case. This review is intended for homeowners who may have been victims of the robo-signing scandal of the past few years, plus all the other errors that lenders may have (definitely have) made during the foreclosure process. If a homeowner is able to prove a ‘financial injury’, they will be entitled to compensation.
There is a catch, you do have to qualify. These are the qualifications:
1. You had to be in the foreclosure process between Jan 1, 2009 and Dec 31, 2010.
2. Your loan must be with one of the 14 participating lenders.
3. The property securing your loan must have been on your primary residence.
This review is open to any homeowner who experienced the foreclosure process in any way over those two years, subject to the three qualifications above. But that includes any homeowners who completed loan modifications, those who didn’t complete modifications, homeowners who sold their homes via short sale, and homeowners who were foreclosed on and lost there homes, some while still trying to modify their loans or trying to sell their property.
This independent review will give those homeowners a chance at redress for the wrongs committed against them.
I would advise that you talk to an attorney prior to making your application for review. You only get one chance. Make it count.
- Zach Shepard
Click here to read the press release directly from the Federal Reserve.
Click here to go directly to the Independent Foreclosure Review website and FAQ.
Click here for a little more info about the extension from an actual reporter.
Mortgage Debt Foregiveness Act Will Be Extended
President Obama’s 2013 budget proposal has called for an extension of the 2007 Mortgage Forgiveness Debt Relief Act until Jan 1st, 2015, as most of us short sale professionals figured it would be. As the Act currently stands, it is set to expire on Dec 31st, 2012. Although there are a several controversial measures in his 2013 budget proposal, an extension to this Act should be a no-brainer to pass into law when the measure is voted on in the next few months.
For a quick recap of the law, the MFDR Act allows homeowners who sell their primary residence via short sale, or lose their home to foreclosure, to be able to write off or exclude the mortgage debt forgiven in the sale on their income taxes. Normally if debt is forgiven, on a loan or credit card for instance, the borrower would have to declare the amount as taxable income on this tax return for the year, then pay their tax bracket on that amount.
Obviously, if a homeowner wants to sell their home but they incur a six figure loss on the loan, that will force them into a more difficult situation, such as bankruptcy or foreclosure. The MFDR Act allows homeowners to write off those loss amounts and move on with their lives.
The Act only applies to debt on primary residences. For investment properties, you would have to claim an exclusion, such as insolvency, in order to write off the amount of debt forgiven.
For more information, check out the Act directly on the IRS’s website: http://1.usa.gov/JGuun
- Zach
Two Keys to Help Financial Recovery For Short Sellers
Or the title could be “How to Keep Tighter Control of Your Financial Scorecard”…
After a short sale, I always try to recommend to clients to take two minor but significant steps to grab hold of their finances: use Mint.com, to help control their budget, and sign up for a credit monitor, like FreeCreditScore.com.
The Mint.com website is set up like a financial dashboard for your personal finances. It shows you where your money is going, where your money is coming from, and gives you suggestions on how to control it and budget it. But that’s only if you want to listen to their advice. The ‘financial dashboard’ is rundown of all your accounts: checking and savings balances, credit card balances, loans for your house, car or loans from Mom & Dad, even CDs or Money Market Accts. You can include the value of your house versus the balance of your mortgage to see how much equity you have. And once you start doing this for a period of time, you begin to see a historical perspective of your finances.
And FYI, Mint.com only stores your financial information. You can’t actually move around money in the site itself, its only used as a recording manual of sorts. I highly recommend it. By the way, Mint is free to use.
The next item is the monthly credit monitor. I’ve been using FreeCreditScore.com for almost five years, and I’ve seen my scores go up and I’ve seen ‘em go down. The service is $12 mo, and its easily worth it. I receive a monthly email showing my credit history, how many ‘pulls’ I’ve had that month, what my ‘debt to credit limit ratio’ is, basically everything that I would like to know about my credit, how it reports and most importantly, how it affects my score. If my credit score jumps by 20 points, I get an email notification. If someone pulls my credit, like my bank or for a loan application, I get an email.
Now I admit, most of us get these credit score offers from our credit card companies and they seem like a BS waste of time. But the knowledge of how your credit score works is worth a few bucks on my credit card a month.
Plus if you just happen to call in to their customer service, and just happen to mention that you wanted to refer them to several of your friends, maybe just maybe they’ll give you a discount off that big $12 monthly fee. Ha I did.
Hope this helps. Good luck!
- Zach
Welcome to Loss Mitigation Pros
Loss Mitigation Professionals are short sale experts, and we are a valuable ally to you when you need a negotiator in your corner. It takes a skilled professional who knows the current market to help you make your property as attractive, competitive and sellable as it can be.
We’ll be bringing you a number of tips and things to watch for in your short sale process, as well as what to expect as the market fluctuates. Get in touch with us today with any questions you have!