By Wade Comeaux
President
Fay Financial
Using HAFA to Promote Short Sales U n H A to P o Sh Sa s
Want niche clientele? Get to know this government program
The U.S. Department of the Trea- sury’s Home Affordable Fore- closure Alternatives (HAFA)
program intends to make short sales
more enticing for homeowners, homebuyers, lenders and others. The program should help reduce complaints
about short sales’ often-lengthy transaction times, unclear expectations and
inconsistent processes.
Mortgage brokers who educate
themselves and their clients about
HAFA can use the program to build their
business in the short-sale niche.
About HAFA
HAFA supplements the Home Affordable Modification Program (HAMP),
designed to help troubled homeowners modify their mortgage payments,
and offers help to borrowers who don’t
meet HAMP’s requirements for a mortgage modification. The HAFA guidelines took effect this past April and are
scheduled to run through 2012.
HAMP and HAFA are voluntary programs for which servicers must sign up.
As of press time, the servicers enlisted
accounted for 89 percent of outstanding mortgage debt nationwide.
Short sales occur when lenders agree
to accept a purchase offer for less than
the current borrowers’ total amount
owed to pay off a home. Many mortgage
brokers have avoided working with
short-sale purchases because of long response times from lenders or servicers
and a lack of preapproved terms. Despite having willing sellers and buyers,
many attempted short sales never materialize because lien-holders can’t efficiently negotiate the sale. In response to
substantially delayed time frames, potential sellers or buyers often walk away.
There are, however, several reasons
HAFA should make short sales more enticing. Brokers who understand these
can facilitate short sales, connect new
buyers to purchase loans and establish
an important niche in today’s market.
Some of the HAFA enticements
include:
• Preapproved terms and required re-
sponse times;
• Less-severe credit damage when
compared with foreclosure; and
• $3,000 in moving expenses for
sellers.
In addition, lenders or servicers can
receive a $1,500 payment for administrative costs (or $2,200 when working with
Fannie Mae or Freddie Mac loans), and
investors can receive as much as $2,000
on a one-for-three matching basis for allowing junior lien-holders to be paid as
much as $6,000. For each $3 an investor
pays to a subordinate lien-holder, the investor will receive $1 of reimbursement.
Lien-holders and private mortgage
insurers involved in HAFA short sales
must waive their rights to collect any
other contribution, promissory note
or deficiency judgment. Despite this,
the aforementioned incentives should
make short sales more attractive and
expedite the process.
times of significant home-price appreciation. On the other hand, servicers often are understaffed and
lack employees with holistic industry
knowledge who can help distressed
homeowners exit their mortgage obligations gracefully.
Communication
Mortgage brokers working with HAFA
short sales can ensure the preapproved
terms are complete. In addition, all parties must receive the terms, which the
lender and servicer must approve.
“Many mortgage brokers
have avoided working with
short-sale purchases
because of long
response times se …
and a lack of
preapproved terms.”
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Come see what we’re all about!
Requirements
Along with requiring preapproved terms
from lenders or servicers, HAFA’s expectations regarding payment amounts
to junior-lien-holders — and the government reimbursement provided to
investors for making that payment —
probably will have the largest impact
in improving short-sale success rates.
Subordinate-lien-holders have been
one of largest obstacles to productive
and quick negotiations. They often
make unreasonable demands and refuse to budge. Junior-lien-holders, however, still must approve short sales.
In addition, here are some other requirements that should clarify and expedite HAFA short sales:
• Lenders and servicers must determine and provide the minimum net
proceeds and provide a short-sale
agreement defining all the key terms,
including allowable transaction costs
and real estate commission.
• Sellers must present a request for
short-sale approval within three
days of receipt of an executed purchase offer.
• Lenders or servicers must approve
or deny the short sale within 10 business days.
• Lenders or servicers cannot require
the transaction to close in less than
45 calendar days from the date of
the sales contract without borrower
approval.
Servicer execution has been one
of the largest reasons for failed short
sales. Many servicers have systems,
employees and processes in place
to service loans and mitigate losses
inexpensively and efficiently during
Brokers also can diligently pur-
sue loan approval for the new buyers
within the confines of the preapproved
short-sale terms. Although servicers
are expected to respond within 10
days, that will be a challenge for many
because of chronic understaffing.
Avoiding back-and-forth negotiations
will be important. Maintaining clear
lines of communication also can help
brokers facilitate negotiations be-
tween all parties.
Wade Comeaux is president of Fay Financial, which services distressed and at-risk
performing residential whole loans for
banks, credit unions and other investors. Fay
specializes in rapidly improving loan performance, liquidating loans through refinance
and other alternatives, and maximizing
returns while freeing up capital. Fay isn’t
signed up to receive incentives as a Home
Affordable Mortgage Program (HAMP) servicer but performs HAMP modifications for
its clients. Reach Comeaux at wcomeaux@
fayservicing.com or (281) 788-8351.
