I have been having a very mentally stimulating and enjoyable debate with another AR'er when it dawned on me that this person may intend to advise his clients to do something that could possibly cause harm. Of course it would not have been done intentionally to cause harm, but out of a misunderstanding.
I would like to issue a warning to Realtor's and Investors alike as well as a heads up to all sellers, that come April 5th, we need to be careful what we advise our seller to do when their servicer calls.
Now I am aware that there can be changes implemented prior to April 5th. And I am also aware that each servicer that contracts to work with the HAMP/HAFA programs is writing their own guidelines as stated on page 3 of the Supplimental Directive... "Each participating servicer must develop a written policy, consistent with investor guidelines, that describes the basis on which the servicer will offer the HAFA program to borrowers. This policy may incorporate such factors as the severity of the loss involved, local market conditions, the timing of pending foreclosure actions and borrower motivation and cooperation."
What concerned me is the, (what I believe is faulty) idea that a borrower can opt out of the HAFA program as offered by their servicer, if the servicer is contracted to work with HAMP/HAFA.
The first step is to determine if your servicer is under the HAFA umbrella. That is easy to do - just go to this link...Making Home Affordable -Contact Your Mortgage Servicer and type in your lenders or servicers name.
If they are, there are a few things you need to know! This very stimulating blog had the comment "Dawn, the HAFA contract is not in the sellers best interest and no one is required to sign it, anyone and everyone can opt out of HAFA" This coment was supported by this statement..."If the borrower fails to contact the servicer within the timeframe or at any time indicates that he or she is not interested in these options, the servicer has no further obligation to extend a HAFA offer."
My understanding of the sentence that was underlined is that this it is not an opt out, but a refusal of options or failure to contact, that escalates the foreclosure sale. This is very dangerous if your property has an eminent sale date. Servicers who have contracted under HAMP/HAFA must offer the short sale option prior to foreclosure sale.
Page 4 Supplemental Directive 09/09 states....If the servicer determines that a borrower is eligible for a HAFA offer based on its written policy and this Supplemental Directive, the servicer must follow the steps below to determine if a short sale or DIL offer will be extended. If the servicer has not already discussed a short sale or DIL with the borrower, the servicer must proactively notify the borrower in writing of the availability of these options and allow the borrower 14 calendar days from the date of the notification to contact the servicer by verbal or written communication and request consideration under HAFA.
As soon as the borrower refuses the offer they can proceed with the sale. What is so nefarious is that if the borrower has previously discussed the short sale or DIL option the servicer may offer the option verbally to the borrower and if the borrower indicates they don't want to participate, or even more devious, a message (voicemail) is left that they are being offered this option, please return a call by XX date, and they don't call back -it is considered a refusal.
If you want to read this directive yourself here is the link! I believe we should all read this!
The second statement made that concerned me was "you will also see the owner can submit an offer under HAFA without signing the SSA, as an alternative, which is what I would recommend if the client wanted to try a HAFA short as there are way too many things in that contract I would not be comfortable with if I were the homeowner in distress."
That statement referred to the option that you can submit an offer with an Alternative RSSA (Request for short sale approval) if you have not participated in the HAFA preapproval for short sale program and have not received the RSSA that is pre-populated with the minimal acceptable net proceeds from an offer along allowable transaction costs that they have pre-approved for payment. But you would need an offer that was fully executed prior to the borrower having been either contacted by or in contact with the servicer....
Excerpt page 6 of Supplemental Directive... In the event that a borrower has an executed sales contract and requests the servicer to approve a short sale under HAFA before an SSA has been executed, the servicer must evaluate the borrower for HAFA as described in this Supplemental Directive and must utilize the Alternative Request for Approval of a Short Sale (Alternative RASS). There is more information on the Alternative RASS on page 8 of the directive.
I JUST WANT PEOPLE TO BE CAREFUL AS TO THE ADVICE WE GIVE OUR CLIENTs, FRIENDS AND FAMILY. PLEASE TAKE THE TIME TO READ THIS DIRECTIVE OR AT LEAST TALK TO SOMEONE WHO HAS BEFORE WE GIVE OUT ADVICE.
AND KEEP CURRENT ON THE CHANGES THAT ARE SURE TO BE IMPLEMENTED!