The announcement of HAFA in April was supposed to change the way we do our business for those of us who do a lot of short sales. Not because it was supposed to revolutionize the way short sales were done, but because it was going to be the Federal Government stepping in and trying to standardize the process of how to complete a short sale. In the lawless world of short sales, that was like a cool breeze on a hot sticky day: very much welcomed.
Many naysayers poo poo’ed the program, saying it was never going to fly and that lenders would not abide by the terms because it was not in their favor. But you know, there always will be naysayers whose job it is to simply criticize any new idea that comes along which challenges the status quo.
Yes, there are still glitches in the system and many employees of banks do not understand or have not been trained in HAFA and we get to deal with a high percentage of them who are not helpful. However, an announcement made last night will resonate and have long term impact on the dynamics of the distressed properties marketplace, in my opinion.
Matt Vernon, the executive in charge of short sales and REOs at Bank of America (BofA) announced that institution will now focus on short sales to liquidate their assets before they get into foreclosure. “We’re going to do everything possible to liquidate property prior to foreclosure,” Vernon said. “REO will still be available, but we will do everything we can to do short sales.” This is wonderful news for consumers as their underwater properties can be disposed of without having to be forced into foreclosure and devastating their credits. This is also good for banks because industry surveys have shown that nets proceeds to banks are significantly higher when short sales are utilized as compared to REOs. BofA is of course is still in the business of making money and has chosen a profitable method, but this method also benefits the homeowners as well. And with all of the loan modifications applications out there, and the unfortunate reality is that a large percentage of those loan modifications will default and end up on the foreclosure circuit.
Mr. Vernon has spoken previously and have been pushing for the notion of short sales taking a more prominent role at BofA. BofA was suffering from backlash on their Loan Origination business as a consequence of them developing a notorious reputation in the short community as being difficult to work with. This move will be followed by other banks in my opinion, like airlines follow and match fares when one major player comes out and takes a stand.
HAFA may not have lived up to the expectation people had about its efficacy in making short sales easier to handle or process, but what it has done is provided an environment where a big player like BofA can come out and concentrate on short sales as a major tool to unload their real estate portfolio. This move on the part of BofA has now pushed short sales out of the niche market and pushed it into the mainstream, making it easier for consumers to get short sale approval, and hopefully quicker too. Now here is truly a win-win solution for all involved parties.