More HAFA Nonsense on a Northern Kentucky Short Sale

By
Real Estate Agent with RE/MAX Affiliates

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.***

And here is the non-sensical issue that led to the reason for the post in the first place:

  • 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.  
The dumbest part of all this?  At that required list price, the deal wouldn't even be short.  There would be excess funds and the owner  could move on like a regular retail customer.  I immediately called the institution and asked for some clarification as this was the first time the number had been so out of whack on a HAFA deal.  The rep told me not to worry and I quote "that number might as well have been made up".  Well...yeah!!  I'd need a 8-10 year listing agreement before that neighborhood could touch that price.  The rep went on to explain that the listing history must show this price for a minimum of 24 hours in order for the deal to go through, but that they would work with us on an offer that was at or around "market value".  She told me that the number was not based on an AVM or even the BPO that was submitted.  It seems it was literally pulled out of thin air.  For all intents and purposes in this scenario, there might as well have been an extra 0 at the end.

Someone please tell me what the point of that is.  Why do it?  

Now I've read conflicting articles about the future of HAFA in just the last week.  One saying that HAFA will be ramped-up and that they are expecting a significantly higher amount of deals.  The other was that there was legislation introduced to do away with the program entirely because it's costing too much money to administer and that there is an atrocious success rate.  Here's to the latter being true...  I've had great successes just working the regular short sale channels at these institutions without all of the extra hoops.



Thoughts?  Similar experiences?  Different experiences?







 

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*************************************************************************************

Nick Dailey (CDPE) - Short Sale & Investment Specialist - Northern Kentucky & Greater Cincinnati

Helping families in Northern Kentucky avoid foreclosure.  Northern Kentucky MLS listings of homes for sale.  

Website: www.NickDailey.com

Mobile Site: nickd.m.remax-ohio.com

 

View Nick Dailey's profile on LinkedIn

 

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Rainer
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Ken B. Banks
Keller Williams Realty - Spring Hill, TN
Realtor Broker CRS ABR RCS-D CDPE CMRS SRES

   Always good to hear what to look out for out here in the real world.

Mar 04, 2011 02:54 AM #1
Rainmaker
30,211
Nick Dailey
RE/MAX Affiliates - Union, KY
RE/MAX: Northern Kentucky Real Estate - NKY MLS - Short Sale

About 10-15 minutes after writing this post, the assigned negotiator called to introduce herself.  When I asked about the valuation, she said it is 120% of the BPO.  Nonsense!!!!!!!!!!!!!!

Mar 04, 2011 04:02 AM #2
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Rainmaker
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Nick Dailey

RE/MAX: Northern Kentucky Real Estate - NKY MLS - Short Sale
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