Comments on: HAFA Short Sales Explained

By: Tim Burrell

Tim Burrell — Tue, 08 Nov 2011 22:53:05 +0000

It used to be, and with some lenders it still is because the lender has not adopted the new rules for HAFA. HAFA now allows the seller to use some of the $3,000 in relocation assistance to do repairs, particularly if they are required by the buyer’s lender. However, there are some lenders whose regulations have not been updated to comply with this revision. So, if the lender considering the short sale still has that prohibition in their guidelines, you may be stuck. Find out who the lender is and check on their compliance with the new revisions. Since you are in the military, I bet you know a lot about regulations that restrict what can be accomplished. Good luck.

By: Judy Smith

Judy Smith — Tue, 08 Nov 2011 22:15:36 +0000

We are trying to buy a short sale house in which the seller is using the HAFA program. We have asked the seller to repair some structural damage before we buy the house, and he has said that he is not allowed to do any repair per HAFA. Is this the case?

By: Tim Burrell

Tim Burrell — Sun, 23 Oct 2011 14:58:58 +0000

No. You can be employed, and you can even be current on your mortgage payments (as long as you are in imminent danger of defaulting on the payment). There are three flavors of HAFA: the regular one, the Fannie Mae one and the Freddie Mac one, so check the rules for each when you are considering a HAFA short sale.

By: Janet

Janet — Thu, 20 Oct 2011 00:13:07 +0000

In order to qualify for the HAFA program, is it true that the seller cannot have any W-2 income?

By: Aar Bee

Aar Bee — Wed, 05 Oct 2011 04:39:32 +0000

Tim,
Thanks a lot for the answer.

last Friday, within two weeks we came to know that collection department, which is a division of BofA (As per my understanding of what the agent told me), has assigned a negotiator. He will provide his findings this week. As per my agent, in order to get to this stage several sets of eyes have to go over it for a host of reasons. As per him this is the last stop on the train from here.

I am hopeful now!

And yes, we will have to get an extension from chase. They gave us 10/14/2011 as closing date!

By: Tim Burrell

Tim Burrell — Sat, 01 Oct 2011 21:20:58 +0000

Dealing with a collection agency normally has an advantage of being quick because they typically respond fast if they bought the loan. If they are hired to collect the loan, it is just an agent of Bank of America and they follow Bank of America rules. The worst case scenario is that the second lender asks for more than what is allowed under HAFA, which is a total of $6,000 and refuses to be reasonable. In that situation, you can switch from a HAFA short sale to a regular short sale and see if you can work it out. How long will it take? Hopefully the collection agency bought the loan and is looking for a quick return. I have had compete decisions by collection agencies in less than a week. If you cannot get an answer quickly enough, go back to Chase and get an extension on the time limit for closing the short sale. So long as you are ready to close, they will usually extend it. Good luck. Tim

By: Aar Bee

Aar Bee — Fri, 16 Sep 2011 21:39:17 +0000

Experts,
I had written an offer on a short sale which has been approved by first lender, Chase. It is applied under HAFA. Chase gave us 30 days to close. Just today after this approval case the sellers agent found that the second lender, Bank of America which held the second loan, has sold the loan to a collection agency by mistake and now the sellers agent has to submit documents to the collection agency so that they return the loan documents to BofA and short sale goes through..
Questions are:
1. Is it normal to have these kind of instances in HAFA as well?
2. What the worst case scenario in this case. Is it possible I may not get this house? what is that scenario?
3. How long can this clarification to the second loan holder, BofA take and shall we be able to close within the time given by chase? What happens if we can’t close by the date given by first lender, chase.

As per my agent since it is HAFA sale, second lender has already agreed, otherwise we would not have got the approval. As per him it is just a matter of time and there are 98% chances that we will get this house. That makes me feel better. What are your views on this situation?

regards
AarBee.

By: Tim Burrell

Tim Burrell — Sat, 13 Aug 2011 19:19:15 +0000

There are two ways to do it, and I usually agree with your Realtor. The first way is to wait for the price that Bank of America will accept, list the property accordingly, get an offer where you know that the sales price will work and get the HAFA approval quickly. In a perfect world, that is a good experience because the buyer has a short time to wait for approval and you know it will be approved. The problem is the time it takes to get the HAFA approval, which brings up the second way. Just put it on the market, get an offer and submit an Alternative Request for Approval of Short Sale, the one you use when you do not have the HAFA approval in your hands. Your Realtor knows what the market is and knows what a reasonable price is, so go out and get the job done. The problem with waiting for the HAFA approval is the foreclosure department at Bank of America does not coordinate with the other departments. So, if you are behind on your payments, they will foreclose. I heard from a friend in Chicago about a seller who was assured they would get the Bank of America HAFA approval, but it took so long the property went to the brink of the foreclosure sale and the seller had to file bankruptcy to stop the sale. Once the HAFA short sale agreement is signed it stops the foreclosure for 120 days, but in the Chicago case they had not reached a written agreement. So when the people at Bank of America ask for you to wait, ask for them to put in writing that they will not foreclose on you or cause you any other problems while they are delaying your sale. When they won’t do that, document the conversation, put the property on the market and get it sold.

By: Mary S.

Mary S. — Sat, 13 Aug 2011 17:19:33 +0000

Tim, I am currently in the process of qualifying for the HAFA short Sale program. I was told by Bank of America that I cannot list my home for sale until I am approved for the program. They claim they need to have an appraisal or Broker’s Price Opinion to determine the list price FIRST. Once they recieve the list price, then and only then, can I list the property. Bank of America told me the approval process will take 6-8 weeks. This is a long time to have to wait before I can list the home (assuming I’ll qualify for the program). The agent that I’ll be working with claims to have done many HAFA short sales and he didn’t have to wait for a list price from the lender in order to list the home.

Is the lender correct? If so, how is it that this agent was able to list so many homes prior to the HAFA short sale approval?

Thank you,
Mary

By: Tim Burrell

Tim Burrell — Sat, 30 Jul 2011 13:56:24 +0000

It may be that the short sale of the first is a HAFA short sale, which limits the amount of payment to the second to $6,000. If so, see if you can change to a non-HAFA short sale on the first loan with Chase, but you may still find that Chase wants the money instead of letting it go to the second. Another solution is to call the secondary marketing department of the second lender and buy the note. Banks buy and sell notes all the time. If you, or someone who is helping you, buys the note, then you have control over what will be accepted as the payoff of the short sale (and most second loans are held by the lender instead of being in a securitized pool that makes them almost impossible to buy only one loan). If you buy the note before closing, the payment on the second loan goes to you as the owner of the note. The value of the note depends on its present value and that value is affected by the risk and difficulty of collecting it. If the first loan has started foreclosure proceedings, the value of the second note goes down. The department that sells notes is independent of the loss mitigation department (who may tell you that they do not sell notes, but that is not true, so talk to the right people instead of loss mitigation). Another choice is to see if the seller can make some contribution and have them pay the second before the closing. There is nothing wrong with a seller who owes on a note making a payment on the note before closing to decrease the amount owed, then the second gets the $6,000 at closing. If there is any advantage for you to rent the property before the closing, you can move in and have the seller collect the rent then have the seller pay down the second loan using the rent money. The rental has to be a reasonable price and a ligitimate transaction i.e. $29,000 for one day does not pass the smell test. If you are inclined to pay the $29,000, ask your closing attorney if there is any problem with your agent paying that amount on the HUD (it shows up in the line 700 area). If it is a HAFA short sale, there may be issues with the agent contributing, so you many have to change to non-HAFA short sale. Then, you enter into a buyer’s agency agreement with your agent to pay them whatever is necessary as a commission, and buyer’s agency commissions are shown on your side of the HUD i.e. all the payments are on the HUD so nothing is done outside of closing. The other choice is to go back to the second again and try to get them to be more reasonable i.e. do an homage to Nancy Regan and just say no to see if they will back down. Another choice is to ask the agent who sold your house why you did not have a contingency for closing on the purchase of this house, and see if they will contribute to the solution of this problem. All of these ideas depend on compliance with your local laws, so consult your closing attorney to be sure that there is no violation of any regulation before you go forward. Your other choice is to call me to discuss this in more detail, you will find me at http://www.TeamForYOUrDreams.com as I have a consulting service to solve short sale problems. Good luck.