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I received this e-mail from our Wells Fargo negotiator yesterday: "Unfortunately, the mortgagor will not be eligible for the HAFA program due to the HAFA imminent default review requirements. The mortgagor’s principal, interest, taxes, and insurance are less than 31% of the mortgagor’s gross income."
Wells Fargo is acting as servicer for a Bank of America loan. There is also a HELOC that is owned by Wells Fargo.
I reviewed the MHA, Wells Fargo and Bank of America HAFA guidelines and did not see anywhere that imminent default was determined by looking at whether the house payment was at least 31% of the borrower's gross monthly income.
My seller is not behind with payments, but her monthly expenses exceed her monthly takehome pay which was documented and Wells Fargo never requested additional financials or clarification. The reason why she is not behind is because her husband who is not on the loan is contributing to the house payment.
While I understand that the imminent default determination is not as clear cut, saying that the borrower is not in imminent default merely because the house payment is less than 31% of the monthly gross seems to be arbitrary and not based on any particular guideline or investor mandate.
I was wondering if anyone else has run into this problem with Wells Fargo. Please keep in mind that this does not involve a Fannie or Freddie loan.
I had a recent Wells Fargo Short Sale that said the very same thing about my client, and gave the exact same reason. My client owed more than she made as well. They would not even seriously look at her situation until she stopped making payments. Once she stopped making payments they re-submitted the short sale and we successfully closed.
As an added note, I have another short sale that the wife owns the property as sole and separate. She lost her job and now only receives social security. Her husband's business has been paying the mortgage. The husband does not want to be tied into this loan. As the contributor they wanted him to write a letter stating that he is the contributor and how much he has been contributing and sign and date it. He would not do so. He wanted to know why the bank wanted this letter. They said, basically, so they could tie him into the loan. When I told them that he no longer wants to contribute toward the loan, they said. just have the owner (the wife) write a letter stating that the contributor will no longer be contributing. Now they are basing everything off of the wife's earnings.
HAFA has always required that the Borrower be at least 60 days delinquent before being considered for the program. If your seller client is running a monthly deficit and does not have enough savings to cover the difference then it will be a short time before they are delinquent. Just resubmit the HAFA application after the seller has missed 2 full payments.
"If a borrower is current or less than 60 days delinquent and would like to be considered,
they may still be eligible pending further review of their financial situation."
Yes, those guidelines are correct, but in my experience they do not really "consider" much. Based on the information posted it appears that the application was "considered", but declined due to the 31% requirement. You could push the issue with the servicer, but I don't think you will get anywhere with it since this is up to the discretion of the servicer and it appears that they have already "considered" it. My experience has told me that servicer discretion covers a lot of areas and rarely is worth fighting unless a foreclosure sale is imminent. It would be much easier to just resubmit after the borrower is 60 days or more delinquent.
Just to make clear. In the above scenario of Wells Fargo and my client. Wells Fargo said, to my client, almost the same story as Ute's story... Wells Fargo said there is no imminent default, I showed them their own matrix saying that imminent default is about to occur. That made no difference to them. In your client's situation with the husband being the contributor, they do not see imminent default, because the husband can and will continue to contribute. As I said above, probably the only way you are going to get their attention (Wells and B of A) is to have him stop contributing.
If the husband is not a borrower do not put his income on the financials.
Hi Jim. Neither the Wells Fargo nor the Bank of America HAFA guidelines require that the borrower be delinquent (i.e., 60 days late). They require either delinquency or imminent default. The focus in my situation is on determining imminent default and the way I see it is that the negotiator did not exercise discretion at all when determining imminent default because she only looked at whether the house payment is at least the 31% of the monthly gross. That is not how imminent default is determined. The 31% threshhold requirement was abandoned some time ago for non-GSE HAFA guidelines.
We did not include the husband's financials, but since we had to provide copies of the tax returns, the negotiator obviously saw his income.
The point is not so much Wells Fargo's decision, but the reason they give for their decision Sure, it would be easier to just default and resubmit, but they should not have to stop making payments just because the lender will not follow their own guidelines.
Yes, that guideline was removed from HAFA and it is also not a requirement in Wells Fargo's own HAFA Matrix. Here is a resource to use to make Wells Fargo follow their own HAFA Matrix guidelines. Escalations@hmpadmin.com
Thank you Kelly for backing me up on this. I reviewed the Wells Fargo, B of A and Treasury HAFA guidelines prior to submitting the short sale package to WF. I realize that the HAFA matrix is not a complete copy of the investor guidelines, but it does not make sense to reintroduce the 31% requirement when determining imminent default. Sometimes it feels like I am in the Twilight Zone.