HAFA Short Sale in Bankruptcy
Hello, Everyone,
I just started working on a file where the sellers are in Chapter 13 bankruptcy and need to short sell. The lender is Wells Fargo and the loan is conventional. I asked the currently assigned single point of contact/processor in the Bankruptcy Department if the homeowners are eligible to participate in the HAFA program. He indicated that he has never come across a HAFA short sale in bankruptcy and said that I could research it further.
My research thus far indicates that bankruptcy in and of itself does not disqualify a seller from HAFA. It's possible that Wells Fargo will be able to tell me more once a negotiator is assigned and they have all of the documentation they need from the bankruptcy courts. But until then, I'm wondering if anyone else has dealt with a HAFA short sale in bankruptcy.
Thank you,
Andrew
Replies to This Discussion
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Permalink Reply by Keji Ogunleye on
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In my experience with short sale and bankruptcy you will need the trustee to approve the short sale. The best thing is to discuss with the bankruptcy attorney so that the house will be removed from the bankruptcy without it you cannot close short sale... just my experience.
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Permalink Reply by Carmine R Biello Jr on
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Hi Andrew,
I deal with this a lot. the property will not be removed from the bankruptcy but you will be required to have an Order from the bankruptcy judge granting the debtor (your client) to sell her property. As far as HAFA incentive, if there would be any, most likely it would be turned over to the Trustee. You need to check with the bankruptcy attorney.
I deal with bankruptcy and short sales all the time. Most of the time, while the client is still in bankruptcy, there is no additional incentive. This is on a case-by-case basis.
Best of Luck!
Carmine R Biello Jr.
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Permalink Reply by Rebekah Gamble on
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Rebekah in CA. I am working on 2 files, both ASC/Wells Fargo Bank in Ch. 13. Now, that's a good time! The BK attorney filed a Motion to Sell and filed with the court. It was granted. I believe the client's attorney can also file a Motion to Abandon (that property). You can sign up for pacer.gov and see the BK history. They had to present the actually offer to the court and got it approved. I was able to pull the approval for Motion to Sell off pacer.gov and got it to the BK deparment, so we are almost there. In this case the seller is not asking for relocation funds, but bet your bottom dollar, the court would probably take it. HAFA and the terms of the DOJ Settlement both specifically state that a borrower can not be denied consideration for a (HAFA) short sale, but the people that work at the banks are generally not trained AT ALL about it, even at Executive Levels. They just say "no". It is a real fight and the seller will most likely have to pay their BK attorney more filing fees. The Ch. 13 is involved in the entire transaction coming and going, so it is like short sale X 5.
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Permalink Reply by Stacey Wilson on
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I have, and closed in March 2012. My client didn't receive HAFA either. WFB said the investor "didn't participate," but the investor was BofA?? We had 2 loans, and the 2nd was pretty much wiped in the Ch. 13. I got approval right away, and they changed my HUD from $1k to 10% of the balance of the 2nd. I was told that is the agreement they have with the 2nd if it defaults, they pay the 2nd 10% of the balance. (both loans with WFB).
But you are right - BK does not qualify borrower from HAFA. My seller just didn't want to chance it going to foreclosure and didn't want to pursue since there was a sale date that had already been postponed.
S.
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Permalink Reply by Andrew Utter on
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Thank you, everyone, for your informative replies! We'll see if the sellers want to risk pursuing HAFA--assuming they're eligible and we can convince Wells Fargo that the sellers should be able to participate.
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