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Hi David:
HAFA is a government program with guidelines. Guidelines which, unfortunately, can sometimes seem like they are being followed, and other times ... not so much.
According to the "guidelines":
If you have cash reserves of $5,000, then that means your monthly mortgage payment needed to be less than $1,666.67/month for you to be denied because: According to HAFA guidelines you can't have cash reserves of $5,000 OR 3x your monthly mortgage payment, whichever is GREATER. So if your mortgage payment is OVER that amount, then that trumps the $5,000 maximum reserves.
If this is not the case (your payment is less than $1,666.67/month) then I would think that explaining why you have the $5,000 should be acceptable especially if it is a one-time event. We recently had a client who suddenly showed a $20,000 deposit in his account (not a HAFA short sale, but it represented a potential problem on a conventional short sale). He explained that he pulled $20,000 out of what was left in his IRA to live on until the short sale was resolved. The "problem" went away.
Regardless of all this, the operative words here are that HAFA is a PROGRAM. Lenders participate voluntarily -- it is not mandatory. It is not the law, there are no investigators policing all HAFA transactions, and I have no clue what the penalties are if a lender violates the program guidelines. Lenders seem to implement it very inconsistently.
Part of your problem could be a significant educational failure. The deadline for lenders (who volunteered to implement HAFA) was April, yet we talk to negotiators at major lenders (like BofA) all the time who still have very little knowledge of HAFA. Even if they do, there is a lot of finger-pointing that goes on - "We would do it it but Fannie Mae won't let us". It's ridiculous. So I wouldn't make a voodoo doll of your Realtor and start sticking it with needles just yet.
Our company has negotiated hundreds of short sales over the years and what we have learned about HAFA leads me to conclude that it is basically a disaster. If one reads all the guidelines and the benefits of doing a HAFA short sale, it makes it look like it is a pretty good deal. But in actual implementation we have seen sellers not get the things they were supposed to get out of HAFA such as; full debt forgiveness on their loan, $3,000 in moving expenses, full commissions for the Realtor (up to 6%), a price up front that the lender would accept for the property, 10 days to make a decision if an offer is presented ...
I may be letting my "right of center" politics shine through here, but I maintain the government can't run a damn thing, and HAFA, HARP, HAMP and their umbrella program "Making Home Affordable" are just further evidence of all this.
My advice to you is: If you really need to do a short sale, tell your lender that you really don't want to do the HAFA program at all unless they can guarantee in writing that A) you qualify and B) you will get ALL the benefits as described by the "official" program guidelines. Without that - stop wasting your time with HAFA and do a conventional short sale.
I second what Steve said: move on to a conventional short sale and use the money you have as a trump card to get any deficiency language removed from a short sale approval letter if need be.
Steve Wrote "If you can't do it in that time frame some of them will force you to do a Deed in Lieu of Foreclosure."
They force you to to a deed in Lieu up front. You sign a form stating if you don't sell in the 120 days you agree to the deed in lieu at that time. When you put in your application, THAT'S when you're agreeing you'll do a deed in lieu if it doesn't sell. Now you can possibly have it extended, but I wouldn't chance it.
That's why I won't do HAFA short sales. Or at least one of the bazillion reasons I won't.
Dave:
When Dominique said: " ... use the money you have as a trump card to get any deficiency language removed from a short sale approval letter if need be."
He is referring to the fact that the lender could grant you permission to do the short sale and then reserve the right to pursue you for the balance. You may be able to offer them an additional payment in exchange for changing the language of their short sale approval letter so that it indicates they are giving you full debt forgiveness. Unfortunately, every Bank of America short sale approval letter I have ever seen says they "reserve the right to pursue you for any deficiency", but I have not ever had anyone offer them cash to change the language of their letter.
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