IS HAFA’S PROGRAM A BREACH OF HUD’S FAIR HOUSING ACT??

By
Real Estate Broker/Owner with Move Up Properties CA BRE Lic 01193694

 

According to HAFA (Home Affordable Foreclosure Alternatives) program slated to take effect April 5, 2010, lenders MUST first evaluate/advise homeowners on HAMP (Home Affordable Modification Program) loan modification programs prior to any consideration of eligibility of the HAFA short sale option.

 One of the goals of the new HAFA program is to simplify and streamline the use of the short sale option by incorporating the following unique features:

  1. Uses borrower financial and hardship information already collected in connection with consideration of loan modification.
  2. Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
  3. Disallows foreclosure sales during the marketing period specified in the SSA short sale agreement. 
  4. Must pay commissions stated in the listing agreement not to exceed 6% of the contract sales amount.
  5. REQUIRES BORROWERS TO BE RELEASED FROM FUTURE LIABILITY FOR THE FIRST MORTGAGE DEBT - NO CASH CONTRIBUTION, PROMISSORY NOTE OR DEFICIENCY JUDGMENT IS ALLOWED.

 If I understand this correctly, HAFA will consider a stream line short sale approval and process for borrowers who have proven their hardship and financial situation already collected in consideration of a loan modification.  I believe that an increasing number of homeowners holding "A"-paper, fixed rate mortgages with adequate earning ability will attempt to participate in the HAFA program due to their negative equity position and desire to move.

 Loss of equity is not an acceptable basis for "hardship".  If these individuals are declined for HAMP due to an unproven hardship will they also be declined for the HAFA short sale process?  I assume so based on the outlined criteria. 

 That brings me to my point.  The government appears to be showing bias towards weaker individuals by allowing them the ability to move from one location to another while eliminating the threat of repayment of the forgiven debt to boot. 

 The "stronger" individuals I referred to may be forced to remain in their current homes with no ability to move unless they can pay off the full principal balance of their mortgage with no assistance. 

 Is this a breach of the US Department of Housing and Urban Development (HUD) Fair Housing Act?  I believe that the term "hardship" will need to be redefined to enable equal housing opportunities for all.

Posted by

Diane Wheatley, Broker

Real Estate Brokerage, Upland CA

 

(909) 815-4499 Direct Cell

CA DRE Broker Lic #01193694

 

 

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Joseph J. Chang 02/27/2010 12:41 PM
  2. TODD PICCONI 909.908.7376 - 3 Decades Experience 07/18/2010 01:37 PM
Topic:
Mortgage / Finance
Location:
California San Bernardino County Rancho Cucamonga
Tags:
borrower
equal opportunity
hardship
upland
hud
short sale
modification
loan mod
loan servicers
hamp
hafa
move up properties

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Ambassador
2,743,846
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Everything the government touches turns in to crap.

Of course, this could be considered "spreading the wealth".

 

Feb 27, 2010 09:07 AM #1
Rainmaker
1,142,325
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Diane, While I understand your point I see absolutely no connection to Fair Housing Laws. fair Housing Laws are serious stuff based on...."race, color, national origin, religion, sex, familial status or handicap"

Having no equity due to declining property values is nothing more than an economic condition. I see HAFA as a step in the right direction. It's not perfect biut I do see it helping many.

Feb 27, 2010 10:56 AM #2
Rainer
4,418
Crockett Keech
Rocky Point, NC

I had not heard of this. Thanks for sharing the info.

Feb 27, 2010 11:47 AM #3
Rainer
16,895
Jeff Stone
Coldwell Banker Residential Brokerage - Port Washington, NY
Seniors Real Estate Specialist

Anything to help speed the 'short sale' process is a good thing but not necessarily a perfect one. With the 'shadow' inventory looming on the horizon, the government is trying to prevent a hugh inventory from creating a devastating effect on the market. Let's hope the goverment has it right This Time.

Feb 27, 2010 11:55 AM #4
Rainmaker
1,560,731
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Fair housing, unfortunately does NOT take into account 'income' . . . discrimination based on: gender, handicap/disability, ethinicity, religion, etc.

Fair Housing Title VIII of the Civil Rights Act of 1968 (Fair Housing Act), as amended, prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap (disability).

There is no protected class for income, financial standings/positions, etc.

If FHA (under HUD) did anything wrong . . . it was that they DIDN'T make it a mandate to DISQUALIFY borrowers based on income . . . more to the point . . . not being ABLE TO AFFORD is not a protected class.  A lot of people would not have been approved if they would have said, "I'm sorry, but if you lose your job, how will your repay the debt?" 

If I had a rental, and someone didn't have the income to pay the rent, I could say "Sorry, I can't rent to you, you don't earn enough."  And that would not be considered discrimination. 

I understand your point, but there isn't any breach.  But, Lenn is right.  Whatever the governement touches . . . well, it's NOT the Midas Touch!

Feb 27, 2010 12:33 PM #5
Rainmaker
514,918
Elva Branson-Lee
Solid Source Realty GA - Atlanta, GA
CDPE - Atlanta Real Estate & Short Sale Agent

It s my understanding that financial insolvency or inability to pay is the bottom line requirement for a short sale.

BTW - The way I see it, the government didn't get home buyers and our industry into this mess. The government didn't offer unsustainable and "creative" loan products or change the lending standards in order to "sell" more loan products to people who couldn't really afford them. But what ever they can do to help us out of the mess...well, I'm for it.

Face it -- we and our sellers need the help. I think it would be more beneficial to do what we can to help make the government efforts work than to bash them for trying.

Feb 27, 2010 01:13 PM #6
Rainer
66,362
Guy Thomas
WR Starkey Mortgage - Colorado Springs, CO

Diane, this definitely fits with this government's biased practices as it tries to massively redistribute wealth and destroy American businesses. There is definitely a rash of favoritism being shown.

Feb 27, 2010 01:35 PM #7
Rainer
80,182
Amy Law
Alliance Properties - Crosby, TX

I just took the FSR class and much about this new "rule" was discussed. It seemed to me that it fit fair housing stardards, but it also seems that a really smart person could find a "loophole" somehow. I also wonder about the "reasonable commission" clause in there set at 6%. That seems almost like it is setting a stardard commission...yes, I know we could always charge LESS than 6%...but who in their right mind...(I'm not going to go there and get myself in trouble. You can finish the statement, if you've ever listed or sold a shortsale or REO you know where I'm going). That is the part that seems shady to me.

Feb 27, 2010 01:36 PM #8
Rainmaker
346,323
Dawn Maloney
RE/MAX Trinity Northeast Ohio Real Estate Specialist - Hudson, OH
330-990-4236 Hudson & Northeastern Ohio

It doesn't seem to be covered under "Fair Housing" law, but it's definitely not FAIR!!!

Feb 27, 2010 02:46 PM #9
Rainmaker
1,560,731
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

@6 -- HA HA HA . . . you have got to be kidding.  Can you say F-H-A?  You have no idea what the govenment "didn't do" in March 2008

Feb 27, 2010 03:14 PM #10
Rainmaker
354,188
Melanie Ross
Coldwell Banker Solano Pacific - Benicia, CA
Benicia CA & Vallejo CA Real Estate, 707-319-2828

Diane,

Just this past week I was on a conference call with Bank of America and Wells Fargo and my understanding is a homeowner DOES NOT have to go via HAMP and then HAFA, there is still the "traditional" short sale process.  and yes the word "traditional" was used several times. One does not have to try for a loan mod first and then go short sale.  I am positive someone out in Rain Land was also on this call and would have heard the same thing.

Feb 27, 2010 03:43 PM #11
Rainer
73,217
Pat, Ben and Martin Mullikin
M3 Realty - Brookfield, WI

Having been one of the strong ones all my life I thought about that exact thing the other day. Just another example of the socialist mentality taking over. When families that have sacrificed having "extras" in order to meet their obligations responsibly see other families who had all the "extras" but did not DO EVERYTHING IN THEIR POWER to meet their obligations get their debts forgiven without ANY stigma attached the responsible familiy has gotta be thinking, "When exactly did the virtue of personal responsibilty die?" Why is it OK to get into debt up to your eyeballs and then just let it go? Elva - the #6 commentator apparently never heard that "We're from the government and we're here to help" is the biggest oxymoron ever perpetuated upon the public at large. Wasn't it the 1997 Neighborhood Revitalization Act during the Clinton era that started all of this? Someone please clarify if you know for sure.

Feb 27, 2010 04:32 PM #12
Rainer
34,433
Carey Scott
Prestige Property Brokers - Columbus, GA

 

Wait a minute.

So people who CAN make their payments and ARE NOT in jeopardy of foreclosure are doing short sales based on lose of equity? And because they want to move?

Just because you want to move or have loss of equity shouldn't make you a candidate for a short sale. A short sale (in my belief) is for individuals that CAN'T make the payments and is in serious jeopardy of foreclosure. 

If you can make your payments how are you considered in hardship? In the short sales I have done the clients have to prove to the lender that they can't make or have a hard time making payments with bank statements, check stubs, and expense reports. If you can afford the home than you aren't a candidate for a short sale now so why should they be a candidate in the future?

Being given a loan that shouldn't have been given in the first place (interest only with balloon payments or adjustable rate), losing a job, and losing household income due to divorce, etc is hardship.

Feb 27, 2010 05:02 PM #13
Rainer
127,382
Charles Dailey
iLoan - NMLS ID#4474 - Saint Paul, MN

And, honestly now, who would have been screaming about government interferance in the private sector had the government tried to stop wall street from providing liquidity for exotic and overly aggressive loan products?  In all fairness both government and the private sector failed.  So did a lot of us in various ways.  Myself included.

Going forward, this is a great concept for making this housing crisis a thing of the past more quickly.  My concern is that it is a great concept with terrible timing.  I fear that dumping these properties on the market with rising interest rates and no tax credits might be a recipe for a double dip in home values.

Feb 27, 2010 05:15 PM #14
Rainer
28,982
Laurel Starks
Divorce Real Estate Institute, LLC - Rancho Cucamonga, CA
Divorce Real Estate Expert

"One of the goals of the new HAFA program is to simplify and streamline the use of the short sale option by incorporating the following unique features:

  1. Uses borrower financial and hardship information already collected in connection with consideration of loan modification."

"If these individuals are declined for HAMP due to an unproven hardship will they also be declined for the HAFA short sale process?  I assume so based on the outlined criteria."

Diane - Just because they use the "already collected" financial and hardship information - that was used for the loan mod - to determine eligibility for the short sale does not mean that the criterion is the same.  They can apply one set of mathematics to a set of numbers for a loan mod and a different formula to the same set of numbers in order to calculate short sale eligibility.

Most loan mods are determined based on 31% of income.  To be eligible for a short sale, one needs to prove they are a serious financial risk. 

Further, just because a loan mod option is entertained does not mean a borrower has to accept it.  They can decline and go on to short sale if their goal is not to keep the house, rather to sell it.

Feb 27, 2010 06:22 PM #15
Rainer
20,985
Felix Hung
Realty ONE Group - Irvine, CA

As with all bills, we will see how well it translates into real help. Your above illustration does not seem to be a violation of Fair Housing Laws, but are definitely unfair to responsible home owners. It is like clearing your debt in a bankruptcy...you want quick relief for a self inflicted problem and you pay the price for it. The people going through short sale need help and a hand up if we are to correct our economy.

Feb 27, 2010 08:30 PM #16
Rainer
126,068
Barbara Kornegay
REMAX Essential - Wilmington, NC
Wilmington NC Real Estate, Homes

Diane, While I understand your point I see absolutely no connection to Fair Housing Laws. fair Housing Laws are serious stuff based on...."race, color, national origin, religion, sex, familial status or handicap"

Having no equity due to declining property values is nothing more than an economic condition. I see HAFA as a step in the right direction. It's not perfect but I do see it helping many.

I agree with this statement, I really think they are trying to make a move in the right direction...

Feb 27, 2010 10:04 PM #17
Ambassador
2,007,084
Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

I'm just glad they are trying to solve the problem. . .there will never be the perfect plan.

Feb 27, 2010 11:18 PM #18
Rainmaker
80,517
Diane Wheatley
Move Up Properties - Rancho Cucamonga, CA
Broker, SoCal Real Estate Expert (909) 815-4499

Yes I realize that my argument does not fall directly under the laws provided under HUD's Fair Housing Act as it is based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap (disability). 

And I am an advocate for the homeowner surviving this housing crisis using any legal means available to them including the possibility of assistance provided through the newly unveiled HAFA program. 

Society appears to strive towards a politically correct culture with its "equality for all mankind" philosophy.   "America was founded on the promise of equality for all. We're working to make sure that individuals of every gender, race, religion, sexual orientation, and national origin aren't pushed to the margins."  Fairness shall be attained by a government of the people, by the people and for the people.

The Constitution protects the acquisition and retention of citizenship.  It protects the basic liberties of citizens as well as aliens.  The Constitution protects our property from arbitrary governmental interference, although debates about which interferences are reasonable and which are arbitrary are not easily settled.   

Which brings me back to my original point.  If we impose special bailouts for the weaker man, the man who fails to make his mortgage payment, experiences a loss of employment or another form of acceptable "hardship" that is rewarded with government assistance, then why should the stronger man be penalized for his steadfast discipline, conservative nature and acts of good fortune? 

Consider this last reference as it relates to the Unruh Act.  The Unruh Act prohibits not only discrimination based on gender (sex), race, color, religion, ancestry, national origin, age, disability and medical condition, but prohibits all types of arbitrary discrimination. Thus, it is comprehensive and expansive, and California courts are continuously identifying new classes of protected citizens and new types of discrimination. For instance, the Unruh Act prohibits a business from giving arbitrary favors, discounts, or free services to members of one group or people and not others.  Can you see the similarities beginning to surface?

Thank you all for your insightful comments.

Mar 01, 2010 06:06 PM #21
Anonymous
Major

We the People should be thinking of ways to help those who are struggling rather than worrying about whether or not a form of assistance is unfair to those who are not struggling.  And, if We the People had a government which worked for us like it was meant to, we wouldn't see all of these struggles, so the problem is much bigger than loan modification and SSA help.

Mar 15, 2010 08:02 AM #22
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Diane Wheatley

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