If I had any hair...I'd be pulling it out right now!! Let's start with the stipulations that come with an approval into the Home Affordable Foreclosure Alternatives program (anybody else with me in that even the name is dumb?). There are plenty of "Gotcha's", as I like to call them, but I'll just focus on what I consider the most egregious and the most damaging to our success in helping homeowners who really need it. I'll get into the specific reason for this post shortly, but here are the general stipulations that I have the most trouble with.
- The owner must continue to make a monthly payment during the marketing period that is determined by....??? Actually, I have no idea how they determine what this payment should be. In several cases that I have worked, the payment was actually HIGHER than the original mortgage payment! And I've yet to see one that is anywhere near affordable/reasonable. The owner is not in this situation because that was an amount that was working for them in the first place.
- ***I see this as a last-chance money grab by the lending institutions to milk every penny they can out of the transaction, knowing that by approving the owner for a short sale, they just agreed to lose money****
- Borrower is responsible for providing clear title and negotiating with all junior lien-holders. Read that again and let it sink in. Here's the exact quote from HAFA: "you will need to either pay off these loans in full or negotiate with the lien-holders to release them before closing." The maximum allowed to clear all junior liens is $6,000. This means if you have a HOA lien, second mortgage, contractor lien, etc., the owner must initiate all negotiations and work within that budget to clear them all.
- ***The first problem is that even if, and it's a big "IF", the owner feels like that is a task that they are willing to take on, do they have the necessary wherewithal, negotiating skills or even the time to handle this task? I'd say more times than not, the answer is "no". And this isn't a knock on the client, it's just a lot to ask of someone who is in this position and who is most likely a novice when it comes to these types of dealings.***
- A Deed-In-Lieu is written into the agreement should the short sale be unsuccessful. Different people will probably take this in different ways. I see it as detrimental to the owner.
- Your listing agreement is compromised. There is a cancellation clause that must be in your listing agreement for approval into the program. Here is the exact verbiage they expect: "Seller may cancel this agreement prior to the ending date of the listing period without advanced notice to the broker, and without payment of a commission or any other consideration, if the property is conveyed to the mortgage insurer or the mortgage holder."
- ***This turns a bi-lateral agreement into nothing of the sort. The bank/servicer/insurer can & in several cases HAS approached the owner and tried to persuade them into accepting a DIL before the end of the marketing period.***
- I listed the property before we were accepted, knowing the borrower had a pretty good set of circumstances both personally and financially for approval. In the HAFA acceptance letter the institution gave a list price for the property. Now I know a BPO was completed within just a couple of days of our first contact with the bank. I know what that BPO came in at. By the time the acceptance letter got to us, we had been on the market for just over a month at a very reasonable price for the neighborhood...with ZERO showings. So what did the required list price come in at? A cool TWENTY THOUSAND DOLLARS HIGHER THAN THE CURRENT LIST PRICE!!!!!! What?!?! I was incensed to say the least.