San Jose Short Sale Agent: Silicon Valley Foreclosure Prevention Specialists

People often talk of the Shadow Inventory, that mysterious excess capacity of homes that will hit the foreclosure market, but is currently in limbo and have not hit the foreclosure market for whatever reason.  There is the usual speculation ranging  from it being the result of  large banks controlling the flow of foreclosure inventory to protect their assets to conspiracy theorists who think the Government is behind it.  But how do you measure it?

Well, economists at Morgan Stanley included the inventory of homes will eventually need to be processed through the REO process, including those that are going through HAMP and HAFA right now.   While others just measure those that are 90 days delinquent in their mortgage payments.  However you measure it, there is a lot of interest in trying it quantify the size of the Shadow Inventory.

Different bloggers and journalists have written about and speculated as to the size of this Shadow Inventory.   This week, Morgan Stanley took on the task and reached the conclusion that it would take up to 4 years to clear the Shadow Inventory. The number of homes were calculated at 8 Million.

Is this assessment accurate or inaccurate?  Who knows. Capital Economics did their own analysis and came to the conclusion that 5.5 Million homes (short of  3 years to deplete)  would fall into the Shadow Inventory.   Regardless  of whose numbers you choose to believe, it is very large at between 3 – 4 years.   It looks like we will have a few more years of having to deal with distressed properties.

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?

HAFA, HAFA, HAFA.  What is it exactly and why are so many people talking about it and why is April 5, 2010 an important date?

For those who have been following the foreclosure prevention solutions like  loan modification and short sales, this  a critical program which will impact their lives in a major way.  This is the Federal Government’s effort into stream lining and standardizing the short sale process for those borrowers who do not qualify for loan modifications through the HAMP  program. The Treasury is obviously concerned about the proliferation of distressed properties in the real estate market and how they affect the overall health of the economy.  April 5, 2010 is when HAFA goes online.

Remember, short sales that do not successfully get approved  end up on the auction block and if they are not sold there, turn up as the neighborhood eye sore in the form of an REO (Bank owned) properties.   If you are a homeowner, the last thing you want is for an REO to turn up on your block as it will set the bottom range of your home price.   Both Short Sales and REOs negatively impact your neighborhood prices, but  short sales often fetch higher selling prices because they typically have homeowners living there and taking care of the  property which means they show better and are in better condition than REOs; the latter are vacant and many times have been vandalized by the homeowners.   REOs are like the black sheeps of the  family that no one will invite to the party.   Everyone’s collective goal is to prevent more REOs from hitting the real estate market.

What is HAFA?

The Home Affordable Foreclosure Alternatives (HAFA) Program is a government-sponsored initiative led by the US Treasury Department assisting all Home Affordable Modification Program (HAMP)-eligible homeowners in avoiding foreclosure, specifically through short sales or deeds-in-lieu. First introduced November 30, 2009 in Supplemental Directive 09-09 as part of HAMP, HAFA assists eligible homeowners in quickly and effectively implementing short sales by providing financial incentives to lenders that work in conjunction with HAMP to assist homeowners in need. The program was introduced in part with the intent to remove the stigma from short sales and help keep communities from being destroyed through massive foreclosures. HAFA in its current state is only applicable to conventional-type, non-Governmental Serviced Enterprises (non-GSE) mortgages and therefore does not apply to loans owned or guaranteed with Fannie Mae or Freddie Mac. These organizations may have plans to release their own versions of HAFA.

Details of HAFA

HAFA was introduced to simplify and streamline the short sale process. HAFA accomplishes this in the following ways:

• Compliments HAMP by providing viable alternatives for borrowers who are HAMP-eligible
• Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis
• Allows the borrower to receive pre-approved short sale terms prior to the property listing
• Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement
• Requires that borrowers be fully released from future liability for the debt
• Uses standard processes, documents and timeframes
• Provides financial incentives to borrowers, servicers and investors

HAFA provides financial incentives as follows:

• Financial incentives for lenders participating in the program include up to $6,000 (updated March 26, 2010; was previously $3,000) servicing bonus upon completion of a short sale or deed-in-lieu
• Homeowners qualify for $3,000 (updated March 26, 2010; was previously $1,500) in Borrower Relocation Assistance after a short sale or deed-in-lieu has been executed (may classify as taxable income in some cases
• Lenders pay all servicing fees — homeowners suffer zero out-of-pocket expenses

Part 2 of 3 – Who is eligible for HAFA

Ah, Bank of America did not voluntarily agree to principal write downs on some  45,000 of Countrywide Mortgage loans because it was the right thing to do after all………  Now we know the true reason for that grand gesture………

Read Article here.

I know everyone hates dealing with short sales and REOs.  The common complaints are that they take way too long and are too uncertain.  Buyers try to avoid them, but that is not becoming possible now.   Look at the new data, distressed properties represent 50% of all sales in California.

This trend will increase rather than decrease because of what is coming down the road.   Starting next month (scheduled for April 5, 2010), distressed homeowners and their lenders may start receiving financial incentives if they agree to a short sale. The Federal Government has come to the conclusion, if you cannot qualify for a loan modification through HAMP, then the next logical step they encourage is a short sale through HAFA.  Starting next month, those same homeowners and their lenders may start receiving financial incentives if they agree to a short sale.

There has been quite a bit about mortgage modifications in the news lately as we are discovering that the conversion rates for loan modification are dismal and those homeowners who have gotten modifications are re-defaulting at astonishing rates. The unfortunate aspect to these stories is that many distressed homeowners peg high hopes on “Obama’s Loan Modification” or “Home Affordable Modification Program” HAMP, yet only to have their hopes destroyed upon learning about the actual facts relating to this hopeful program.  A lot of this is due to incomplete or simply wrong information floating about out there in cyberspace on the various fora or websites.   And when you add emotional and mental stress on top of  the misinformation, it can become a recipe for huge disappointment

We are simply living  in unprecedented times where 14% of all mortgages are delinquent and some sub-categories are approaching 50% delinquency rates.

I am including here a report called The Truth about Mortgage Modification which has information which should help dispel some misinformation and point people in the right direction if they require help.

Click for the story

It’s  about time!

Those of us who specialize in short sales obviously know, believe and have been evangelizing about the fact that short sales not only help the homeowners but the lending institutions as well.  Unfortunately, there is a lot of misconception and misinformation floating about out there (especially on the internet by unenlightened, so-called “authorities”) who try to contradict these facts and – for whatever reason – plant seeds of doubt in confused homeowners’ minds.    Unfortunately these doubts germinate into inaction and often end up denying a perfectly viable alternative (inaction leading to foreclosure) to distressed homeowners who need them most, out of their difficult situations.

Now the Treasury has finally taken a position and set things straight with HAFA (Home Affordable Foreclosure Alternatives):  short sales are better for homeowners than foreclosures because: 1) they preserve the homeowner’s credit rating, especially in obtaining Fannie Mae loans in a much quicker manner and 2) they are also better for the lending institutions because the former typically gets higher prices than foreclosed properties.  These are truly win-win situations for the homeowners and lenders and that is precisely why the Treasury is pushing to make them easier to complete if a loan modification is not viable.

This program tries to address a lot of what is wrong with the short sale process, however, in my opinion, it addresses the single biggest enemy of short sale practitioners: the dreadfully drawn out approval process by many lenders. (Although prior to HAFA, some lenders decided on their own to streamline the approval process.)  It is not uncommon for the approval process to take 3+ months due to a combination of inadequate staffing and simple bureaucracy.  It will be manna from heaven to reduce the approval timeframe to only 10 days, as opposed to months.  Short Sales get a bad reputation because buyers often walk out of a deal because they are simply tired of waiting for the lender approvals and buy different, unencumbered properties.   An approval or denial within 10 days will save many, many short sale deals and give the distressed homeowners dignified resolutions to their financial ordeals.

Granted, HAFA, like HAMP (Home Affordable Modification Program) cannot be forced on the lenders, but at least it will lend political and social pressures on these mega-lending institutions which have been given so much assistance during their difficult times by the Treasury. This is definitely something in the right direction in addressing our foreclosure fiasco by the Obama Administration.