With all of the changes on Fannie short sales, I want to be sure I have this straight.
My client has been offered a Fannie short sale and an appraisal has been done. (It's waaay too high, but that's a separate issue I'll deal with.) Anyway, from the beginning, we'd planned to pursue a HAFA sale. After discussions with the servicer, they have agreed that a HAFA sale is acceptable for the client, but continue to state that they will pursue a promissory note workout with the borrower after the sale closes.
I thought that a HAFA sale would release the borrower from future liability? Especially in Washington State where we're working.
Can someone clarify this for me? I did look on the Fannie site and in their FAQ doc dated 4/30/13 it sure does look like they're reserving that right .......
Does anyone have any suggestions for us? I'd sure appreciate it. Thank you!!
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But Aida -- a Fannie HAFA II short sale is not a traditional HAFA sale. This is where I got confused. Everything you say about HAFA is what I was looking for in a HAFA II Fannie short sale. The two are not the same.
Gabrielle, the reason to pursue the short sale is, one of two outcomes:
1) The deficiency is waived, no promissory note, everbody is happy
2) The Majority of the deficiency is waived, and the seller signs a promissory for say 10-30% of the deficiency.
Wayne, if we can get the deficiency completely waived without a promissory note, then a short sale is a better option. If there IS a promissory note involved, then a foreclosure may make more sense.
FNMA, as a matter of course, always asks for a contribution no matter how insane it would be. I have not had an FNMA in a while, but by simply pointing out the finances, I usually got it totally dropped. In other cases, reduced - like in asking for $10K and getting $1K cash.
If you go through closing, you get a "settled not in full" on your credit report vs. foreclosure. I believe there is a big diff in what that does to your credit. If you SS, say the bank writes off $100K loss, they cannot go after you for that $100K. If they foreclose, they can. If you SS and end up with a $10K note they can't go after you for the $90K diff, but can for the $10K unsecured. So, is it really better for the bank to go after you for $100K (plus interest and penalties) than $10K (at 0% interest)?
Credit stuff is purposely a mystery, so it is possible that something like a "new" note being ignored for $10K weighs heavily instead of an old note for $100K+, but I doubt it. To me, nothing is worse to your credit than a foreclosure. And if the diff is sold to some collection agency, wouldn't you rather finally pay them off at 10% of $10K than 10% of $100K+?
Fred, you said Washington is NOT a non-deficiency state. I assume you mean by this that Washington is NOT a non-recourse state. So, why do you say a lender can't pursue a deficiency after a foreclosure, since there is recourse?
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