The two GSEs (Government Sponsored Enterprise) Fannie and Freddie Mac have tremendous impact on the housing industry.  Unfortunately, they also have in their portfolios, a lot of distressed loans where homeowners are severely under-water and do not know what to do.

They have attempted to deal with the situation by providing better options like short sales and deed in lieu programs.  As with any government programs, there is a lot of bureaucracy, so to streamline the process and have one website where the homeowners can obtain all of the options available for a Fannie Mae loan, the former has created this website.

www.knowyouroptions.com

It is a one stop shop to learn about all of your options if you have a Fannie Mae loan.

Freddie Mac still has not announced their own website, but these two organizations often operate in unison, so it would not be a big surprise to see it announce a similar website in the near future.

Freddie Mac CEO Ed Haldeman announced the number of its short sales increase by 600% from 2008!  An increase was certainly obvious, but 600%?   And with HAFA still ramping up, that number is sure to increase in the near future.

In a statement put out this week, Haldeman said Freddie Mac is doing everything it can to prevent more foreclosures, and that short sales are becoming an ever-popular tool in situations where foreclosure is imminent and modifications have failed.

The rationale behind this increase in foreclosure is, again, obvious for distressed homeowners.

“Foreclosure alternatives like short sales and deeds-in-lieu help borrowers to avoid the stigma of foreclosure, shorten the waiting period before they can buy a new home, and may inflict less damage on their credit reports,” Haldeman said.

He added that these alternatives are also helpful to lenders and insurers. Citing several independent studies, Haldeman said banks lose more than $50,000 per foreclosed home or as much as 30-to-60% of the outstanding mortgage.

You don’t need media reports like these to know that short sales are increasing dramatically, just ask your local realtor who handles a lot of short sales whether their short sale volume is increasing.

As we come to the final part of the series, and have learned about the details and the eligibility of the HAFA program; we have learned that it is beneficial to the homeowner who cannot qualify for loan modifications.  And because the lenders typically will net more through a short sale than foreclosure, it makes financial sense for them to participate, especially in conjunction with the bonus components which have increase dramatically as of March 26, 2010.

So without further adieu, the list of lenders and servicers who have agreed to participate with the HAFA program are posted below.  For the full detailed list, please click on the final link below.

Who is Supporting HAFA?

Lender and loan servicers participating in HAFA must have signed a servicer participation agreement with Fannie Mae – the program administrator and financial agent representing the United States in this case – to participate in HAMP by December 31, 2009. Therefore, most lenders are participating. As April 5 approaches, lenders are developing comprehensive programs in order to prepare for the expected flood of applications for short sale agreements and deeds-in-lieu of foreclosure that HAFA will unleash.

Bank of America

• Bank of America announced in March its commitment to participate in HAFA when it activates. It has been preparing for a more streamlined process for months though its support of HAMP.
• Bank of America’s short sale processor Equator has announced the launch of a brand-new best practices software workflow solutions directly related to HAFA^.

Citibank

• Citibank is participating in HAMP which is a requirement for participating in HAFA

GMAC Financial Services

• GMAC has started a program to preemptively contact borrowers who are not eligible for loan modifications under HAMP and offering discussing alternatives through HAFA and claims a three-day turnaround on short sale applications

Lenders Asset Management Corporation (LAMCO)

• LAMCO has been training teams of specialists to support mortgage servicers comply with HAFA and quickly negotiate short sales

Wachovia

• Wachovia is participating in HAMP which is a requirement for participating in HAFA

Wells Fargo

• Wells Fargo is participating in HAMP which is a requirement for participating in HAFA
• Wells Fargo has been ramping up efforts to assist homeowners by actively contacting those who are facing hardships

NATIONAL PARTICIPATING SERVICERS

Currently, the HAFA Program has not been activated. Therefore, there is not yet an official list of participating lenders. Generally speaking, lenders who participate in HAFA are also participating in HAMP. For a full list of servicers participating in HAMP, visit Making Home Affordable’s Participating Servicers List.

As discussed briefly in the previous post , HAFA is the new Federal Government’s Program designed to complement the loan modification Program (HAMP), to help those borrowers who cannot qualify for said loan modification efforts.   Below is a bit more detail in a FAQ format.

What does HAFA stand for?
Also known as the “April Program”, HAFA stands or Home Affordable Foreclosure Alternatives. It’s a brand-new government program starting on April 5, 2010 that will streamline and incentivize alternatives to foreclosure. Under HAFA, participating banks must work with you to help you avoid foreclosure.

What are the “Alternatives” in HAFA?
HAFA provides two alternatives that will allow you to avoid foreclosure:

• Short Sale – If you owe more on your home than it is now worth, a short sale will help you sell your home and save yourself from financial ruin. According to HAFA, a real estate agent must be involved in this process. Agents with the CDPE designation are specially trained to help you with a short sale.
• Deed-In-Lieu – This is where the bank accepts the deed of your home instead of (“in-lieu of”) foreclosure. You do not get to keep your home, but your mortgage debt is forgiven.

HAFA also provides up to $3,000 in Borrower Relocation Assistance to help you transition beyond a short sale or deed-in-lieu of foreclosure.

Why should I consider a HAFA short sale?
HAFA sets distinct guidelines and incentives for banks and lending companies so that you will know whether or not you can complete a short sale. One of the common myths about short sales is that they take forever to complete. HAFA makes sure that short sales happen more quickly by streamlining the short sale process.

How is HAFA different from a short sale?
The main issue with traditional short sales was that they took too long, and it was difficult to keep buyers interested in the process. HAFA is a program designed to speed up the short sale process and even gives banks incentives for each short sale they do. Also, after completing a HAFA short sale, you may be given up to $3,000 in Borrower Relocation Assistance to help you transition. During a non-HAFA short sale, there is no government incentive for banks to help you.

Do I have to hire a real estate professional for a HAFA short sale?
Yes, but it doesn’t cost you anything. HAFA pays the real estate professional’s fees. It is a requirement of a HAFA short sale that you work with a real estate professional to help you through the process. CDPE-designated agents understand this process, and are located throughout the country. Find a CDPE in your area today to help you get started.

How do I get started?
Your first step should be to contact an educated real estate professional in your area. An agent can walk you through the HAFA process, determine your eligibility, and provide you with the best solutions available for your particular circumstances.

How do I qualify?
Most homeowners facing financial hardship can qualify for HAFA. If you applied for a HAMP Trial Period Plan but did not qualify, or were unable to complete the Trial Period Plan, you are definitely eligible for HAFA. If you are unsure about your situation, contact a CDPE in your area immediately.

What’s in it for me?
HAFA is the only program that gives you cash for avoiding foreclosure through a short sale or deed-in-lieu of foreclosure. If you complete a short sale or deed-in-lieu, then up to $3,000 in Borrower Relocation Assistance may be available to aid in your transition. This program seeks to ensure that no one will be left high-and-dry if they cannot afford their home. The biggest gain of HAFA, however, is that it helps you get your life back if you feel like there are no other solutions when faced with foreclosure.

How long does the process take?
HAFA speeds up the short sale process by putting in place distinct timelines that the banks—and you—must follow. Each step of the process has a defined amount of days in which it must happen. This keeps everyone on track. The longest possible time allowed in the HAFA short sale process is four months.

What is the April Program?
HAFA is commonly referred to as the April Program.

HAFA Scams
There are many people out there trying to scam homeowners by requesting up-front fees for HAFA short sales. This is fraud. A CDPE-designated agent will never ask you for money. MakingHomeAffordable.gov(MHA) provides the following guidelines:

• Beware of anyone who asks you to pay a fee in exchange for counseling service or modification of a delinquent loan.
• Scam artists often target homeowners who are struggling to meet their mortgage commitment or anxious to sell their homes.
• Beware of people who pressure you to sign papers immediately, or who try to convince you that they can “save” your home if you sign paperwork or transfer over the deed to your house.
• Never make a mortgage payment to anyone other than your mortgage company without their approval.
• Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.

Who is Eligible for HAFA?

Most homeowners in facing financial hardship are eligible. As a rule, if a homeowner is eligible for HAMP but cannot pay the mortgage, then he or she is eligible for an assisted short sale through HAFA. However, loans owned or guaranteed through Fannie Mae or Freddie Mac do not qualify. Servicers must consider possible HAMP eligible borrowers for HAFA within 30 calendar days if the borrower has one or more of the following criteria :

• Does not qualify for a HAMP Trial Period Plan
• Does not successfully complete a HAMP Trial Period Plan
• Is delinquent on a HAMP modification by missing at least two consecutive payments
• Requests a short sale or deed-in-lieu

For a loan to qualify, it must meet the following criteria:

• The property is the borrower’s principal residence
• The mortgage loan is a first lien mortgage originated on or before January 1, 2009
• The mortgage is delinquent or default is reasonably foreseeable
• The current unpaid principal balance is equal to or less than $729,750
• The borrower’s total monthly mortgage payment (as defined in Supplemental Directive 09-01) exceeds 31 percent of the borrower’s gross income
• The mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac

Part 3 of 3  Which Banks are supporting HAFA?

Someone asked me today why I didn’t mention anything about the Deed In Lieu of Foreclosures (or simply Deed in Lieu) portion of HAFA (Home Affordable Foreclosure Alternatives) in my previous post.    The answer is simple: because of the requirement to be free of  liens.

A Deed in Lieu simply means you are telling the bank that you can no longer afford to keep up with the mortgage payments, so you offer to turn over your deed to the lender in exchange for you getting out from underneath the note.  If you can find a lender who agrees to this, that may be a quick way out of the impending foreclosure mess, but the hitch is that the property must free free of liens.   Free from liens means you cannot have a second loan against the property or have any other liens like unpaid property taxes or unpaid HOA dues.  A big problem for most distressed homeowners.

In expensive California (and more specifically here in Silicon Valley), a majority of  homes are purchased utilizing a combination of  first and second loans.  Many people who could not afford to come up with the 20% down payment, financed the down payment with a second loan.    The vast majority of people who are in distressed situations now are those who have both first and second loans.  But to add insult to injury, once people are unable to pay their mortgages, they are often also equally unable to keep current on their property taxes or HOA dues.

So for most of Californians, when we talk of HAFA, we really are talking only about a Short Sale because it is the only viable option with no restrictions against having liens on properties.