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HAFA, 3 liens and the 1st getting full payout... is it possible?

Posted by tanyafranzen on March 12, 2011 at 9:18am in Short Sale Discussions

 

Looking for feedback as this is the first of this kind I have run into.

1st & 2nd same servicer.

1st is Fannie owned.

3rd is another servicer and a HELOC

No PMI.

 

Based on current offer, the 1st would get full pay out, the 2nd would recoup about 50%, the 3rd - nothing....

 

Can you still request it to be processed through HAFA?

 

 

 

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Tags: 3, hafa, lienholders
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Replies

  • tanyafranzen March 13, 2011 at 5:36pm

    Thank you all for the great feedback... many of your comments confirmed my thoughts, however I know that as a community we sometimes come up with some great "work arounds".

     

    To answer some of the questions... we are just getting ready to submit the offer to the lienholders, waiting on the EST HUD from Escrow.... should have it first thing tommorrow....

     

    Client have only missed March's payment on any of the 3 loans, so they are newly defaulted.

     

    My game plan (unless I get other feedback) is to submitt the EST Hud as follows:

    3rd - 10% owed  (approx. $4,300)

    2nd - Balance  (Approx. 50% of what is currently owed)

    1 - Full payoff

     

    The seller is stubborn.... refuses the whole idea of signing a note.... of course they refused to go short sale for a month before they understood that thier home would not sell at their break even point which was way over market. So I will plant the seed... as it is a much better altrnative then having that deficiency hanging over their heads...  

     

    Thanks for all of the feedback... feel free to continue to send it

     

     

     

  • Nate Gerard March 13, 2011 at 3:04pm

    Some ideas off the top of my head:

    1. How long has it been since the third lien was paid? If it's been a long time, they may be ready to send it to collections at which time you could devote a small portion of the proceeds devoted to the second to go towards the HELOC. HELOC's that go to collections sometimes will take 10% of the balance.
    2. If you've listed at 6% and are giving the buyer's agent 2.5% you could take your commission down to 2.5% and devote 1% to the HELOC.
    3. Can the seller sign a note? I hate doing that but maybe that will satisfy the HELOC. $10K at 4% over 10 years is just over $100 per month.
  • Todd Stearman March 13, 2011 at 10:22am

    Tanya-

     

    If you look at what HAFA applies to, I do not believe you would be able to do a HAFA short sale.  The HAFA program was designed to give the 1st lien holder's the incentive to do a short sale.  It does not apply to the junior lien holders.  Essentially you are only negotiating a short sale in this case with the 2nd and the 3rd lien holder, so HAFA would not apply.  If the 2nd lien holder is set to receive 50% of their note, then you will need to negotiate with the 2nd to give up some portion to the 3rd so you can get both of them to release their liens.

  • Raymond Kennedy March 13, 2011 at 9:27am

    I would have to look at the terms of the HAFA again but I don't remember it saying anything pertaining to a 3rd lien. Here is my original gut feeling, your will have a very difficult time getting HAFA approved on this one even if it falls into all the guidelines. Bryant was correct in saying that it only applies to first lien holders and the Jr. liens will need to play ball under the guidelines of HAFA. 


    The simple fact is that in a HAFA deal all liens will have to agree to comply with the terms of HAFA meaning agreeing to release liability. The 3rd lien holder here is a HELOC. That in itself is difficult to get them to agree to release liability. Now you are expecting them to agree to the Short Sale with no payment is pretty much deal killer. You have to give them an incentive to release their lien. HELOC's are structured so they can continue to collect after a foreclosure so you have to pay them enough and convey a transparent hardship so the HELOC doesn't see an opportunity to collect money. 


    My question is how have you determined the payouts on this. How are the numbers structured and who determined this. The way you have the numbers setup it doesn't look like you will have any chance of getting a Short Sale approved let alone a HAFA Short Sale. I would have to know the details of the deal but I would be interested on seeing why you believe the first lien is getting full payout and the 3rd lien isn't getting anything. 

     

  • Bryant Tutas March 13, 2011 at 1:51am
    Hi Tanya. HAFA will only allow $6,000 maximum to be paid towards junior liens. HAFA also only applies to 1st mortgages. So, in your case, since the 1st is going to be paid in full then the borrower can't do a HAFA short sale. But they can certainly try to do a short sale on the 2nd and the HELOC.
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