HAFA is a voluntary program by which all major banks agreed to abide.  It is a successful program which has generated a lot of interest and one of the primary reasons which has fueled the volume of short sales to increase beyond the number of foreclosures that are being processed.

Considering that large institutions spend big bucks training their staff to remain compliant with changing guidelines, one would imagine two months is sufficient time to be educate the front line about the changes that affect the bottom line of the lenders and borrowers.  However, it doesn’t come as a total surprise that bank negotiators are in the dark about changes that took place two months ago in the Making Home Affordable Program’s Supplemental Directive.

I have a HAFA short sale that is in negotiations with one of the 5 large lenders.   In their efforts to mitigate their losses, the negotiator has on more than one occasion informed me that the payoff for the second lien would be capped at $6,000.  The supplemental directive mentioned above changed that payout from $6,000 to $8,500.

I have mentioned this fact to this negotiator.  He said he had not heard of this change, so I had asked him to check with his supervisor so that he can be made aware of the recent change. Today, he mentioned the $6,000 payoff again.  I reminded him about the recent changes and read him my notes during our previous conversation about checking with his supervisor.  He muttered something and said the he was still unaware of the changes in the payout.

I understand there is no incentive for him to check and payout $2,500 more as required by the directive, but that is $2,500 more which will go to pay down the second lien for my client. So rather than continue to ask him to check with his supervisor – which he may or may not do -  I chose to upload a copy of the directive with the appropriate paragraph highlighted so that he could have documentation to support his paying out the additional $2,500.  He was happy to learn that the document would be provided to him rather than him having to search it out on his own.

As agents for our clients who have fiduciary responsibilities to look out for their best interests, sometimes we have to take on the obligations of our counterparts. Some may say $2,500 is not a lot of money, but depending on how much loss the second lienholder has to write off, that amount could be the difference between an approval or no approval.  Neither the negotiator nor I may know, but there is a reason why the program decided to increase the payout by an additional $2,500; that number has some significance.

Because we represent the party who has the most to lose – their homes and linked financial incentives – the listing agents have to make sure that everyone is following the revised rules.  Yes, two months is far too long to be unaware of the rules, but if we do not take appropriate action and spoon feed them the correct information, then the only party to gain is the bank which gets to keep the $2,500 and feign ignorance.  And that $2,500 will have greater impact on the life of my client than a top 5 bank.

After completing over a dozen successful Bank of America short sale using their Equator system, San Jose Short Sale Agent has been selected and added on the Bank of America Short Sale Professional Locator website.   For various legal and liability related issues, Bank of America cannot recommend and suggest certain real estate brokers over others in listing short sale properties for sale.  However, it can compile  a list of agents with whom it has had smooth and successful transactions.

And this invitation only list is what Bank of America publishes on its website and directs homeowners who may be contemplating short sales to connect them with experienced short sale professionals numbering in the  hundreds, out of thousands and thousands of licensed Realtors in Silicon Valley.   It may not be a high honor, but it is another lender preferred list  that the San Jose Short Sale Agent is on along with CitiBank and Wachovia in our continued effort to help fight foreclosures in Silicon Valley.

 
BofA Short Sale Professional Locator

Unfortunately, there is a lot of conflicting information floating around on the net and in the media  about whether a short sale is truly better for the home owners than a foreclosure.

To help eliminate some of the confusion, the CDPE organization has created this video to help identify and make comparisons in 5 categories which will impact a home owner’s future.   The video is simple and easy to understand and gets to the point of what are important to home owners who may be trying to make informed decisions on some of the most difficult choices of their lives.  

As the article below indicates the volume of short sales has continued to rise and has now surpassed foreclosures.  This is happening because the lenders net more money in  successful short sales than foreclosures.  So obviously we know why the lenders want to push short sales.

However, there are financial benefits to the homeowners as well when they do short sales, compared to foreclosures.  If you are having difficulty paying your mortgage on your primary residence, there are a few ways by which financial compensation is available to induce homeowners to choose short sales.

The HAFA program provides three direct incentives.

* $8,500 will be made available to pay off any second mortgage holders (this was only $6,000 until March 9, 2012).

* $3,000 is made available to the homeowner directly as relocation assistance

* If lenders agree to permit a short sale, they must release the borrower from all     personal liability.

Then there is the tax incentive.  If the short sale is completed by calendar year 2012, then the IRS will “allow taxpayers to exclude income from the discharge of debt on their principal residence.”   Simply put, your taxes on the forgiven portion of the mortgage will be waived by December 31, 2012 according to the Mortgage Debt Relief Forgiveness Act.  In California, the Franchise Tax Board will follow the IRS’s lead.  Depending on the amount of the loan, and how much negative equity is involved, this could be a huge amount of money.

I have been crowing for months that the time now is the perfect occasion to do short sales.  The benefits to both the lenders and borrowers are clearly obvious and all involved parties certainly seem to have taken advantage in order for short sales to jump ahead of foreclosures in volume.  Homeowners are now planning their futures rather than simply permitting the lenders to make decisions for them.  I have always told my clients to take control of their own financial destiny by making the appropriate decisions; after all, no one will take care of your own interests like yourself.

 
Short Sales Bypass Foreclosures, Hinting at Hope for Housing Market

Since Bank of America recently announced it’s Mortgage to Lease program – a program which would offer some homeowners who are facing foreclosure the option to lease their homes instead of facing foreclosure, the San Jose Short Sale Agent has received numerous  calls from distressed homeowners asking how they can participate or learn more about the program.

Unfortunately, I have had to inform these hopeful homeowners that the program is not available to them.   Bank of America is in test mode in only three high foreclosure states:  Arizona, Nevada and New York.    At the moment, the program is not available to homeowners in California.    As it is in test mode, we can hope that the program may become available to help some homeowners who want to stay in their homes, but such option is not available to Californians at the moment.

Print – BofA Offers Leasing Program to Select Customers Facing Foreclosurealls and email inquiries as to how t

On March 9, 2012, changes were made to the MHA (Making Homes Affordable Program) otherwise referred as President Obama’s Foreclosure Assistance Program.   HAFA (Home Affordable Foreclosure Alternatives) is a subset of the above program designed specifically to handle short sales.

There were many changes to the MHA, but we will be focusing on some of the exciting changes to the HAFA portion of the program.

Some of the changes which will impact home sellers are:

• Program end date to be extended out to December 3, 2013
• $3,000 relocation assistance to owners who live at the property or tenants occupied properties.  Servicer is required to verify occupancy.
• Secondary lien holders payout has been increased from $6,000 to $8,500
• Credit Bureau recording will now be required as either code 13 ( paid or closed/0 balance) or 65 (paid in full/foreclosure was started), whereas there were no such guidance before

The most significant change, in my opinion, is the extension of the HAFA program for another full calendar year.  HAFA is a highly successful program and its use is increasing on daily basis; and the program has played a major role in giving structure and creating for the first time a national guideline for the entire short sale process.

The fact that the second lien holders will be getting an increase in the payout limit from $6,000 to $8,500 is another component which will make the bitter pill a little easier for the second lien holders.   An additional $2,500 to the second will make it easier and will permit greater numbers of short sales to close.

There used to be an occupancy requirement where the owner had to live in the property within 12 months, and only the homeowner was able to receive the $3,000 relocation incentive.  The update now permits the payment of the relocation incentive to the party which needs to vacate.  So this now means that the tenant can receive the $3,000 incentive instead of the homeowner.  For the first time, this change gives the tenant a financial incentive which was not available before.  Now tenants can earn money to cooperate in showings and work with everyone else to see the short sale close, rather than stand in the way.

For those  homeowners whose primary concerns are about  saving their credit scores, they can continue to pay their full mortgage payments to prevent late payments from showing up on their credit history.  The second component is a uniform reporting requirement to the credit bureaus.   The update makes the reporting simple by offering 2 options to insure that the reporting will be done in a timely and proper manner.

HAFA Updates

As the video says, all children of the world should have the right to not fear being kidnapped in the middle of the night and to live a normal child-like life.

Please pass along this video and make the world a safer place fort those children inAfrica.

www.kony2012.com

The bank dragged you through the dreadful experience of a loan modification, only to humiliate you months later by announcing they rejected your request and were also going to accelerate the foreclosure process to boot (a little surprise called dual track foreclosure).  They were supposed to help you; but not only did they not help you, they made things worse by putting you on the fast track to foreclosure.

You are so angry, that you want the bank to foreclose on you and you want to start destroying the house before they get it back.  Understandably you are angry and no one would blame you for wanting to punch holes in the walls.  You feel you were tricked.

However, now that it is clear there is no help coming, are you really doing what is in your best interest or are you letting your anger get the best of you?   This was the exact scenario of a client who was flying out of control after he received the rejection letter.  (Sadly, this type of back-story is quite common when you listen to homeowners in distress).

After punching a couple of holes in the wall out of anger, he took heed to what the bank employee told him: hire a good Realtor to do a short sale of the property before the trustee sale (auction) was completed.

My client decided he was not going to let his anger prevent him from exercising options that were available to him.  He needed to get any help he could.  The denial of the loan modification meant he was not going to get any financial relief.  He was certain to lose his home but the bigger problem was the thought of owing the banks the difference on the loss of value after foreclosure (a.k.a. deficiency claim); this meant he would incur more debt obligation.

One of his close friends had informed him that he was going to lose his home anyway, so why not take advantage of financial benefits that were legally available to him?  His friend was in a very similar situation and had just completed a HAFA short sale on his home with me; so he insisted on calling me.  His friend stopped the foreclosure from happening and showing up on his credit history; received a $3,000 check to help relocate; the proceeds helped pay down the obligations on his HOA and taxes; and most importantly, he was able to cleanly walk away from the home because the deficiency claim was waived as a condition of the short sale agreement.   He wasn’t walking away empty handed; he was taking full advantage of all of the financial benefits available to him.

Some readers may question the ethics behind the homeowner who fell behind on his mortgage, walking away from the home with money in his pockets.  The ethical consideration behind HAFA and its financial benefits to homeowners is not for me or other Realtors to consider.  We are simply responsible for working to achieve the best outcome for our clients using all tools that are at our disposal.  We have a fiduciary duty to take the very best care of our clients.

Programs like HAFA are not forced upon the lenders who participate in the program: it is a voluntary program. If the lenders did not feel they were benefiting from paying some homeowners to make it easier for them to walk away from their unaffordable homes, then nobody could force them to participate in a money losing proposition.  Please don’t feel sorry for the lenders, because they are making more money by permitting short sales than foreclosures; even after making financial incentives to distressed homeowners.

Now back to my angry client.  Was he a bad person for making financial gains when he was the one who could not continue to pay his mortgage?  I would disagree with that statement. I would say he was being a good consumer and taking full advantage of all programs and benefits which were legally available to him.  For him to let his anger overwhelm him and to lose out on financial incentive intended for him would have been both foolish and a self-defeating thing to do.  The best way for him to take revenge against a bank for which he had nothing but contempt would be to make the best use of the system and extract more benefit than was originally offered.   My angry client was able to do this, and we successfully closed our HAFA short sale last week.

After helping numerous families successfully fight foreclosures in Silicon Valley, the San Jose Short Sale Agent was named again as the Top Listing Agent last year.   My goal is to continue helping as many homeowners fight foreclosure and   provide them with as much accurate information so that they may take advantage of the benefits available to them and to move on with the next chapter of their lives.