Can the seller use their HAFA incentive to pay towards their 2nd lien?

I have a HAFA approval with B of A.  The seller is receiving 3k for HAFA incentive and also a HIN incentive of 5,600.  The seller has a 2nd and 3rd lien which of course are requesting more than B of A will give them.  The seller is willing to use the incentives to go towards the payoff of these 2 other liens but B of A is declining the HUD because you cannot use HAFA incentives towards other liens. 

My questions is.... does this only apply to the HAFA incentive of 3k?  that the seller cannot use towards other liens?  Or does it apply to both incentives that the seller cannot use it towards other liens???

I do know that on a Co-Op short sale they can use the incentive towards anything they want.  But this is HAFA.

Anybody else run into this issue????

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Permalink Reply by Kevin - Greenville, SC on November 15, 2012 at 7:33am

Nope.  The transaction would not be HAFA qualified if they did.

Permalink Reply by Short Sale Superstars LLC on November 15, 2012 at 2:09pm

Lacey,

           Typically HAFA does not allow the seller to use their HAFA incentive to contribute to additional lien holders. Also, it is important to know that HAFA allows 8,500 max to outside lien holders. If the 2nd and 3rd are requesting more than 8,500 HAFA will not allow contributions to show on the HUD towards those liens.


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Permalink Reply by Lacey Hamilton on November 15, 2012 at 3:03pm

So.... Here is where I am at on this one.  Since this is a HAFA short sale, the seller cannot use the incentive (either HAFA or HIN incentive) towards any other liens.  They could however use it towards another debt (utilities, etc.) 

If it were a Co-Op short sale then the seller can apply the relocation incentive to anything they want.

They are however allowing the buyer and agents contribute towards the 2nd and 3rd liens.

Please also note that B of A is now requiring the Unearned Premium Insurance Refund letter to be uploaded prior to HUD approval.  And, yes you still have to upload it with the closing docs.

Thank you all for your input.   I hope my experience helps you when you initiate your short sale and gear them in the right direction (either HAFA or Co-OP or Traditional).

Permalink Reply by Kevin - Greenville, SC on November 18, 2012 at 1:09pm

Subordinate Mortgage Lien Holder(s) cannot accept any money from any party (i.e., Buyer, Seller, Agent(s), etc.) if the Short Sale is to be HAFA qualified.  If the Lien(s) are non-Mortgage, then it would be acceptable.  And I am assuming that this is a non-GSE Loan.

Permalink Reply by Kevin - Greenville, SC on November 25, 2012 at 9:15am

14. May subordinate lien holders seek additional contributions from the real estate agent or the borrower as a condition for releasing the lien and the borrower from personal liability?

No. The $8,500 limit to pay off subordinate lien holders is a hard cap. Junior lien holders may not receive additional contributions. Any payments to subordinate lien holders must be shown on the HUD-1, as required by RESPA. 

Permalink Reply by Kathy Clark on November 18, 2012 at 5:33am

 You can use the co op incentive but not the HIN or HAFA  incentive to go to the second agreed!  

Permalink Reply by Lacey Hamilton on December 7, 2012 at 6:35am

this is correct.  If it is a HAFA file, nobody can contribute towards the payoff of any other liens.  Kevin is correct as stated above.  The max amount to be paid to all liens is 8,500 total.  In my case the 1st lien paid 7,500 towards the 2nd and 1,000 towards the 3rd.

I did have an issue on this file as the closer approved the HUD with the buyer and agent contributing towards the 2nd and 3rd liens.  They are working on resolving this problem because the closer approved the HUD and we funded.  The file has been escalated and I believe they are going to switch out the approval to show co-op short sale instead of HAFA so the borrower can still receive their incentives.


Hope this helps anyone in the future with HAFA files.  It is so important to know how to structure the short sale and choose the correct program that will work best if you have more than one lien.


Thank you...

Permalink Reply by joe beauchamp on December 7, 2012 at 6:44am

If you have an issue with paying off liens and restrictions, it can be worthwhile to go back to the actual guidelines. A couple of years ago, I read the guideline which went out of its way to say none of the proceeds could be used for xyz. Why would they say that rather than no one can pay for xyz? Clearly, it is making a distinction about the proceeds vs. from the buyer, the seller, or anyone else. Most people gloss over the actual and go by hearsay or some writeup. But if you are in a pinch, it can be worth spending 20 minutes looking at the real thing.

And there are at least 3 different HAFA's. You have to be looking at yours. (fannie, freddie and the real one)

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