Since cynicism runs deep in my blood, I thought I would ask the ever-present question on every skeptic's mind- is this new foreclosure avoidance program REALLY going to help anybody?
I ask this because, not only did the last government-authored homeowner-assistance program not help anyone (I exaggerate, it did help ONE person), but there are so many loopholes in the wording of the new HAFA program, that it is easy for anyone to smell what's fertilizing the lawn on the other side.
Don't get me wrong, I WANT this program to work. I WANT to see the housing crisis that was brought about by government mandating that risky mortgages be made be solved by the same people that created it. True, I may be leery that this will work, but hey, as long as it makes the Big G look like they care and are actually doing something with a POSITIVE outcome, then I am all for it.
So what's my beef? Well, it simply is this. While HAFA seems to include a good number of people, the fact that individual lenders and investors can set their own parameters, unrestricted, including whether or not individual investors want to even participate, could easily cause some problems. Now let's face it- it may not and this all may be written for naught. Plus, I couldn't use that catchy title if there wasn't some skepticism, so I admit; there is a bias to this argument.
So seller A wants to get rid of their home. Let's say that they meet all of the eligibility requirements, namely the following:
•1. The loan is for a home that is their principle residence.
•2. The first mortgage was originated on or before January 1, 2009
•3. The mortgage is either delinquent or default is reasonably foreseeable
•4. The current principle balance is under $729,750
•5. And the total monthly payments exceed 31% of the borrower's gross income.
First of all, did anyone else see any grey area in the requirements?
But I digress. So let's say, for instance, that this loan is serviced by Bank of America. Since they are the big player, it's easy to use them as an example. What many people do not realize, is that the money that Bank of America uses to lend to homeowners for the mortgage may not come from Bank of America! There are numbers of private investors who allow Bank of America to lend out their money. In the case that the loan is owned by one of these investors, there is a reasonable chance that the investor will decline the short sale. Or, the investor might mandate that the borrower be delinquent 60 or 90 days before they qualify. Each investor can have their own set of guidelines that will mandate whether or not they will accept the short sale in the HAFA program.
But for argument's sake, let's just say that the investor DOES participate. The investor can mandate that up to 31% of the borrowers gross monthly payments be made during that time the home is on the market. This may or may not be feasible, but again, for arguments sake, let's just say that it is.
Finally, the investors, who don't live in the area or, in most instances, have a clue about local real estate markets, decide on the lowest amount they will accept for the sale of the home. I would hope that this is at fair market value, but there is no guarantee. And sure, agent and borrower could argue with the investor what the home is really worth and extend the whole process...
HAFA touts that it shortens the time frame of the short sale because they qualify the seller before the property is marketed. Great idea- I thought that would have been a common sense beginning, like three years ago when short sale became prevalent. But hey, better late than never, right? However, the HAFA short sale process can still take up to 4 months! Unfortunately, this IS better than many short sale right now. But still a bit on the long side for most people. It's not like we're dealing with hazardous or explosive objects here- they're HOUSES!
Sure, I WANT to get excited, I WANT this program to work, I WANT to help preserve property values and neighborhoods with a pre-emptive strike against foreclosures before they happen, and I WILL work like mad to make sure that I help as many homeowners as I can...sometimes it's just hard to get excited when you know who's behind it all.
So let's work together to find someBODY to help, and make the best with the tools that are given to us. And in the meantime, let's also work to make sure that better tools are available in the future.