Does the government know how HAFA is being run?
My clients and I initiated a traditional short sale. Bank of America called the homeowners multiple times per day until they agreed to do an alternative HAFA short sale. My clients wanted to go with HAFA as it would help with relocation expenses. Everything was moving along beautifully to the point of receiving a counter that all parties were in agreement with... I thought all I was waiting for was a short sale acceptance letter from the investor.WHAM! I get the call. The MI company wants a HUGE cash contribution and a HUGE Promissory note.
"What!?" I think to myself. I was told that my clients were approved for HAFA over a month ago.
"If your clients don't contribute they will be removed from HAFA." I was baffled... isn't it the other way around? "Isn't it once my clients contribute they are automatically denied HAFA?"
Essentially, I am told that no matter what Bank of America verbally told me about my clients being approved for HAFA as of January 4, 2011, the MI company holds the trump card and they have final say so on HAFA and the entire short sale for that matter. We tried negotiating with the MI company to no avail.
This is a first lien purchase money loan and Arizona is a non-deficiency judgment state, so I am baffled here. Is this the way HAFA was intended to run? "Yes, you qualify and were approved until the MI company steps in and makes ridiculous demands?"
Replies to This Discussion
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Permalink Reply by Sean Wilder on
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That is a very convoluted situation but the answer is yet. The MI co can stand in the way of HAFA. They do not have to accept nothing and give a full release. If they are demanding anything then the file cannot close as a HAFA deal and must be a traditional short sale. That doesn't mean that BofA can't still give them money for moving expenses though. That is negotiable.
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Permalink Reply by Liz Harris, MBA on
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Thanks, Sean.
Sean Wilder said:
That is a very convoluted situation but the answer is yet. The MI co can stand in the way of HAFA. They do not have to accept nothing and give a full release. If they are demanding anything then the file cannot close as a HAFA deal and must be a traditional short sale. That doesn't mean that BofA can't still give them money for moving expenses though. That is negotiable. -
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Permalink Reply by Steele V. Propp on
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I just remember in training that a secondary lien holder does not have to go along with HAFA (unless they have already agreed ahead of time to do so on seconds). That is why multiple liens were less likely to get through this program. So I am not surprised that the MI company would have veto power as well.
Maybe someone can explain why in more detail.
Steele
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Permalink Reply by Michael Schneider on
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The MI company must approve for HAFA. It's in the guidelines.
Scan the guidelines for the section: Mortgage Insurer Approval. It's stated there clearly and explicitly.
As to why, I doubt that Treasury could "demand" that the Mortgage Insurance companies waive their right to pursue the deficiency. It's in the contract between the Insurer and the Investor, right of approval and right to pursue, at least in the ones I've read.
I would think enabling legislation would be needed to set aside these contracts. Isn't that called bankruptcy?
On a practicaly level, the MIs are in horrible financial condition. The government would not mandate BK for them, which I think you would be asking for, if they were required to waive their rights.
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Does anyone know if the MI company (MGIC in this case) will be okay with taking the contribution from the buyer instead of the homeowner?
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