HAFA Commissions: HAFA BEFORE Offer Versus WITH Offer (SSA/RASS Versus Alternative RASS)

I spend a couple hours today re-reading the MHA HAFA documentation, to better understand the program's commitment to pay the full 6% commission.

 

There is a different statement about commissions in each of the two cases:

 

Case I: SS Agreement BEFORE the sale contract is submitted.Versus,

Case II: SS Approval requested WITH the sales contract.

 

This is not a new observation, but it wasn't clear to me, until this morning.  NAR discusses this in a 4/28 memo:

 

There is a different rule if the borrower submits an executed sales contract to the servicer for approval before a SSA is executed. In that case, the sales contract is submitted to the servicer with an Alternative Request for Approval of Short Sale. The amount of the commission in that case is the amount negotiated in the listing agreement, not to exceed 6 percent.

 

My read of the agreements is that the commitment to pay 6% may be stronger when the Alternative RASS process is followed.  Meaning, when you request approval for a short sale WITH the executed sales contract.  But, not guaranteed in either case. 

 

In Case I, the SSA BEFORE sales contract, I think the document says: The Servicer negotiates with broker/seller to set the commission and the broker agrees to modify the listing agreement.  I read this as: The Servicer reduces the commission to 5%.  Then, the program agrees not to require a reduction of the commission in the listing agreement, which you already agreed to reduce to 5%. REDUCTION.

 

In Case II, Request for Approval WITH sale contract, the Servicer accepts the commission in the listing agreement, eg 6%.  BUT, they can still impose an overall cap on closing costs that will generally preclude paying the full 6% commission (eg, 9% as Freddie is doing).

 

And, moreover, in each case there is the "retained vendor" clause, who is paid from "sale proceeds", which is effectively the Servicer being paid from sale proceeds.  If this clause is interpreted as “paid from the commission”, then the commitment to "not reduce  the commission" is a sham.

 

This is how I read the MHA HAFA program on commissions.  What do others think?

 

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Replies to This Discussion

Permalink Reply by Smitty on July 10, 2010 at 10:05am
This program is NOT for the benefit of the homeowner or agent, but certainly the lenders make out:

"The amount of the real estate commission that may be paid, not to exceed 6% of the contract sales price, and when applicable, notification that the servicer retained a contractor to assist the listing broker with the transaction along with the payment amount (expressed as a fixed dollar amount or percentage of the contract sales price) if paid from sale proceeds."

Basically if the lender requests assistance from a contractor, say goodbye to the 6%.
Permalink Reply by Elise Fay on July 12, 2010 at 7:58am
I have been updating everyone on the HAFA Short sale where the buyer walked. Well all we need is a new contract with the HAFA Terms and conditions and we can close BUT...the market in Arizona has softened a bit, as is usual in the summer months and combining that with the tax credit that has disappeared, things are slow.

I was told by the negotiator that if we can't meet their terms and conditions we can always go the traditional short sale route. I still need to find out if that means starting over from scratch but I am not convinced of the HAFA program anymore. I think the pricing is a bit high (definitely not on the low end of the scale) and I think they are trying to jack up the prices so the bank is compensated for the $3000 relo expenses AND the fact that they will waive the deficiency.

I am so hesitant about starting another HAFA....Fannie's will be the same way. I do believe that the only way to proceed with the HAFA is to submit it with the offer and go the ARASS route. BUT...if we are approaching a Foreclosure date and there is not much activity on the house in question, then maybe starting it sooner will at least get the date postponed. Any thoughts or Strategies...I am just wiped out and exhausted from all of this. Thanks

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