DO WE HAFA HAFA? BOA AND OTHERS RE-INTERPRET HAFA ELIGIBILITY
Pretty much all the agents we work with have done HAFA short sales where the lender first saw the deal when the contract was submitted by the agent and then a BPO substantiates the FMV for the contract and the sale goes through. HAFA has certain benefits to borrowers in that the deficiency is forgiven and there is often a move out bonus (although we often find it to be of dubious value once the closing fees are adjusted by the lender).
It is important to understand that there is a HAMP and HAFA Workbook and published “Guidelines”. However it says in those publications that the lender / servicer is allowed to implement the programs using their own interpretation of the Workbook and Guidelines.
Bank of America and others have revised the way they work within the HAMP system to more strictly adhere to the concept that the borrower should first be offered other alternatives to a short sale or deed in lieu of foreclosure prior to the determination that the home is completely unaffordable
and needs to be sold. There are exemptions, such as change of job further than 100 miles from the home. The end result is now a borrower wanting toshort sell needs to first apply under HAMP and be determined “HAMP eligible”. This designation deals with a determination that the property is a primary home or recently was, and that the cost of home ownership is greater than 31% of the borrower’s gross income.
If the borrower passes this initial test, the borrower can then ask for a short sale and reject further offers for modification of the mortgage terms. Then it move over to the HAFA department and they determine the value of the home and assist the borrower in finding or signing up with a real estate agent to market the home under lender guidance at a price set by the lender.
For giving up obvious rights regarding the marketing of the home, the borrower is given certain benefits stated in the first paragraph of this article.
If the agent submits the short sale with a contract, BoA and some others will no longer route the transaction through the HAFA process, but the transaction will be considered an “Alternative (or “traditional”) Short Sale”. Alternative short sales have lender dependent rules and procedures, but sometimes end up the same or better than HAFA program limitations, so don’t fret if this is the route you take. The big difference is that a borrower does not know what the end result will be until the short sale approval letter is received from the lender under an alternative short sale process.
Try to stay abreast of the latest developments in short sale
procedures – you will save time and keep your clients’ happier.
Copyright 2011 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult
your own attorney on any legal decision you need to make. This article is for
information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM
BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660
[email protected] -
FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers
with Short Sales and Modifications and Consult with Brokers and Sellers
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Replies to This Discussion
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Permalink Reply by Smitty on
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Richard, I thought in January they did away with the 31% gross income and financial verification? I also thought a homeowner apply directly to HAFA and not have to go through HAMP so long as they filled out a modification affidavit? I'm not a HAFA fan at all. I have submitted a traditional short sale only to have the lender tell me my homeowner was HAFA eligible, so they filled a couple forms out.
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Permalink Reply by Beverly Cibulsky on -
We all need to post what is going on with Hafa/vs the Servicer. Every one seems to Hate HAFA! Actually, I am looking for a good HAFA certification, if anyone can reccomend one I would appreciate it!
We need concrete verification, that the Borrower DOES NOT have to through HAMP, and can proceed to request HAFA consideration. I have always suggested that a Borrower that meets the basic HAFA quidlelines, just go a head and request HAFA consideration! There are strict guidelines that the servicer must meet when this happens! Yes, if the Borrower was deniend modification, they should be a HAFA "slam dunk"
We all just need to be aggressive enough to stand our grounds and tell the servicer "like it is"! I have found that pricing the property a little high, while the seller seeks HAFA can work. I now have an approval without an offer but at least have direction and a "target sale"
By the way, any one know if/what HAFA will allow for Buyer's Closing Cost? Like Fannie will only allow 3% on the HUD1? The SSA is very vaque to this issue.
Thanks Richard for your input!
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Permalink Reply by Richard Zaretsky on
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Early this year they supposedly loosened the "verification" process on some types of short sale reviews. But all I saw was a reduction by some lenders of the oldest year's tax return. The 31% is definitely still in play. see the link in the article.
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Ahhh, I think I've got it. I THINK the elimination of the 31% rule is for NON-GSE mortgages, but Freddie and Fannie may still require it. Does that seem accurate? https://www.hmpadmin.com/portal/programs/docs/hafa/sd1018.pdf
"With such low numbers, the Treasury has eliminated rules that have constricted eligibility for HAFA. Among them, servicers are no longer required to verify a borrower's financial information or determine if the borrower's total monthly mortgage payment exceeds a 31% debt-to-income ratio. Servicers still must obtain a signed hardship affidavit." http://www.housingwire.com/2011/01/05/treasury-relaxes-rules-to-fre...
Is this article incorrect?
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Permalink Reply by Alyce Nelson on
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My experience has been different from your post. "Alternative" and "Traditional;" short sales, as I understand things, are not the same, even with BoA. An Alternative short sale is a HAFA short that begins with an offer in-hand, as opposed to applying for HAFA getting approved and being given a pricing target and then bringing in an offer. BoA (as recently as 3 weeks ago) reviews all incoming offers for an Alternate HAFA short sale potential. If you suspect they have not, or you want to assure your seller is considered, make it very clear when you submit that the seller wants to do a HAFA short sale.
BoA always wants to personally interview the seller, I nip that 2 week delay in the bud and tell them to hold on for a minute while I 3-way the seller in on the call and we get it done right then and there. I always set things up with the seller first to assure they will be available when I place that call. Once the 3-way is established I introduce the seller to the BoA rep and go silent. The only time I step in is when it is clear the seller is confused and I just work to clarify things between the rep and the seller. Works like a charm and works every time. This works with other lenders too.
If you know your seller does not want to go the HAFA route or you know they won’t qualify, go the phone route again and follow it up with a letter from the seller saying the same thing. Post it in the library and send in the Equator email as an attachment. Otherwise you can get stuck in a never ending loop and really rack up a delay.
If you get sent into the HAMP-LoanMod loop have the seller write a letter, sign and date it, stating clearly they do not want a loan modification, and they will be pulled out of the HAMP loop and referred to HAFA. Post it in the library and send in the Equator email as an attachment. I have done this repeatedly with BoA and never had a problem with it. This will be sufficient for some reps others will want to speak to the seller directly… so you do the 3-way call thing. Otherwise they will send a letter telling the seller to call them and the file will sit until the seller calls, if they ever receive the letter!
A traditional short sale, as I understand it, is a short sale that does NOT go the HAFA, or Alternate HAFA (ARASS) route.
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Alyce - thanks for the suggestion and my staff will discuss such routes.
On the traditional short sale is indeed a non-HAFA short sale. However, from what I see from BoA recently, an Alternative short sale is also a non-HAFA internal program.
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Permalink Reply by Kevin - Greenville, SC on
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From the 'horses' mouth at the Treasury Dept. I'm unclear if this applies to GSE Loans as well.
Laurie A. Maggiano
Director of Policy
Homeownership Preservation Office
Department of the Treasury
> Please let me introduce myself, I am the Director of Policy for the Making
> Home Affordable (MHA) Program at the US Treasury. Recently HAFA policy was
> updated to include the following requirement, which can be found in Chapter
> IV, Section 3 of the MHA Handbook (last paragraph):****
>
> ** **
>
> *"Unless prohibited by investor guidelines, servicers should utilize HAFA,
> rather than a proprietary short sale or DIL option, in all cases where a
> short sale or DIL is approved by the servicer and the transaction otherwise
> meets the guidance provided in this Chapter." *
>
> ** **
>
> While Wells was perfectly correct in denying a borrower who failed to
> submit required documentation or would not allow a BPO to be performed, if
> Wells is willing to consider any short sale option for this borrower, they
> should consider HAFA first.****
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This may help to clear some confusion between the Servicer(s) and the HAFA Guidlines (I hope!).
https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1108.pdf
The HAFA Matrix includes a servicer’s process for re-evaluating a property value, as more fully described below. The topics and language in the HAFA Matrix are provided only as an example of what a servicer might include as an aspect of its HAFA Policy that is unique. Each servicer must draft the language in its HAFA Matrix to be consistent with its HAFA Policy and any specific investor requirements or prohibitions.No later than October 15, 2011, each servicer must complete and post its HAFA Matrix to its website and provide Fannie Mae, as the Program Administrator, with the web address where the completed matrix can be located. Treasury will identify to the public the web location of each servicer’s HAFA Matrix on MakingHomeAffordable.gov. Each servicer must keep the information in their HAFA Matrix up to date, including any changes to the servicer’s HAFA Policy. If the web address where the HAFA Matrix can be located is changed, a servicer is required to notify the Program Administrator of the new web address five days prior to the change and provide a re-direct from the old web address to the new web address.
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Permalink Reply by Kristin Johnsen on
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I am also not a HAFA fan, especially when BofA is involved. They make it impossible for a seller to want to participate for their "great" incentives. They run them through a 45 day "approval" phase which they hardly ever qualify for and if you get an offer during the process you are automatically denied, then they place you in the "HAFA with an offer" phase and that takes up to 45 days and they are denied. I think this program is a complete waste of everyones time. If they could figure out how to streamline the process more homeowners in need would benefit. Everyone of the short sale I have worked that started out HAFA eligible have all been completed a traditional short sale.
As for BoA in general, I think they are the worst bank to deal with, the staff is very polite but they seem to always make up their own rules and think that everyone needs to follow them. I have had BofA staff tell me to have a seller sign an offer on the acceptance line instead of the counter offer section even though they didnt agree to all terms laid out in the contract, when asked none of them were licensed real estate agents or attorneys but were instructing people on how to fill out real estate forms. And with the Equator system, they are the only ones that make the agent work through the system and not a third party negotiator. Don't they know that not all states allow the agents to conduct short sale negotiations? Again, they are making their own rules making everyone follow.
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