HAFA is not guaranteed as not all lenders will be participating. Investors currently participating in HAMP or the Obama program may continue to participate but it must be understood that many can also back out and choose to no longer participate as these programs are not an obligation and more of a suggestion with some incentives. As for now some of the largest participants, Fannie Mae and Freddie Mac, are still trying to decide how they are going to implement the programs themselves. The main problem with the program is that there is a lot of rhetoric being thrown around to push blame from one group to another and at the end of the day there is still a large amount of running in circles we’re going to do for our clients in the months to come until each and every lender figures out, much like every judge in a court, take the guidelines and interpret them in their own way. Anyone say Lawyer time?
We are not saying one thing or another more than just we are going to be very cynical before we claim that this is going to be a great program. In essence it does have potential so we’ll see where it goes. The main highlights of this coffee table topper are as follows:
Implementation Guidelines stated the period starts 4-5-10.
Homeowner must meet threshold HAMP Guidelines:
- Pre-2009 Loan
- Principal Balance can not be 729,750 (this is based off of what they currently owe — including back due payments, fees, attorney fees and costs, etc.)
- Delinquent or Imminent Default (Making less money, running out of savings, etc.)
- Principal Residence (may have moved for job, etc.)
- Payment exceeds 31% of Gross Income
Incentive Payments are going to be given to those that qualify to help all parties work towards getting a success short sale agreement:
- Seller(s) will receive money for Relocation up to $3000
- Loan Servicers will receive an Incentive of $1500 to helps with dealing with Government Programs and all the hoops that they have to jump through.
- Incentive to Pay Jr. Lien(s) – If the Investor for the First Mortgage allows money to go to the Second Mortgage the Second Mortgage can receive double their money up to $2000. Furthermore $2000 for allowing $6000 for Jr. Lien holder incentives (6% cap per lien). No payments by agent or borrower to 2nd mortgage holder allowed. New rules announced on March 12th the homeowner can not be pursued for a deficiency. This must be negotiated. We suggest to use a Loss Mitigation Specialist who will deal with hundreds of issues and see many different reasons where 2nd liens may not be willing to participate in this program. This program may not be available on debt that has been charged off. More information to roll out over the next couple of weeks.
Forms are expected to be be complicated even for professionals and it is actually part of the program homeowners will have to use a Real Estate Agent. They will not allow for sale by owners (FSBO). Loss Mitigation Specialists will have their own preferred networks and at no costs to you will have you set up with an agent and process your short sale(s). These groups will generally work with all types of homeowners from those that own one home their personal residence and are prepared to work with investors who may own several homes but feel that they will not qualify for this program. If you need more information contact 888-934-3444 to be connected to an Short Sale Specialized Agent local to you.
WHAT UNIFORMED FORMS WILL I BE SEEING AS PART OF A HAFA APPROVAL?
SSA or Short Sale Agreement
First form that the servicer prepared. Puts in value of the property, minimum net that they are looking to receive, list approvable closing costs and other terms and conditions. The borrower will receive this. They will take this form to a real estate professional. If it is agreeable then they will both sign and send back. If borrower and property qualify, servicer sends that Short Sale Agreement. Borrower/seller and the real estate broker sign and return within 14 days. This acknowledges:
- That doesn’t make the Broker a party to the contract but they sign to acknowledge that they have been retained to sell the property
- They agree that they have received the SSA
- They agree to SSA controls
- Understands servicer will only review offer with a Request for Approval for a Short Sale or RASS
- Servicers specify reasonable and customary commission up front (Loss Mitigation Specialist and Agents may negotiate this).
- Buyers and Sellers may not earn commissions
- Bank appointed negotiators will not be enforced as was originally planned with this program
- Initial period to sell will give the Borrower/Seller up to 4 Months to Sell
- The loan Servicer may extend up to a total of one year.
WHAT IS THE NEXT STEP ONCE AN OFFER IS RECEIVED:
- Submit it with the RASS attached
Attached to the Request for Approval of Short Sale or RASS:
- Sales Contract (and addenda)
- Buyers Proof of Funds or Pre-qualificiation
They will have 10 day window. They will not confirm to this at first but eventually they will get better.
If the servicer decides to approve the deal:
- they will sign the RASS and send it back. (Includes warning about phantom income — may be exempt)
- Closing and payment instructions are included
- Short sale approved this program will be given at least 45 days to get the deal closed
IF the servicer disapproves or declines the short sale they will need to explain why it has been declined:
- Inconsistent with specified terms & conditions
- Lacks two required addenda (sales contract and evidence of buyer financial capacity
- net proceeds insufficient
- mortgage insurer did not approve
WHAT IF THE SERVICER DOES NOT PROVIDE A HAFA PRE-APPROVAL or SSA:
This will be more of a traditional short sale where you do not know ahead of time what the lender will accept. All the incentives will still apply but the process will be back to the short sale program that we all know and love. It will also include the new additional steps of:
Submitting the Alternative RASS Form (ARASS) – This is used if the borrowers/seller has an executed sales contract before an SSA is executed
Servicer must give the Borrower/Seller the opportunity to qualify for a Loan Modification
Commission is according to the amount agreed up on in the listing agreement
This program will also included Deed-in-lieu updated information which we will focus on in another post over the next couple of days.
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