Loss Mit Services

Good Changes Coming to HAFA

Posted on 06. Jan, 2011 by ctlms in Foreclosures, My Blog, News, Real Estate, Short Sale, foreclosure

There are some changes coming to the HAFA short sale program that will positively affect your clients

on Dec 28, 2010 Supplemental Directive 10-18 was issued by the Making Home Affordable program.

These changes take affect Feb 1, 2011.

Many of these changes address negative issues that have limited this program up until this point and have disqualified many sellers.

Key Changes coming;

1. Vacant or rented properties will no longer be disqualified from HAFA so long as the property was the seller's primary residence within the last 12 months.
2. There will no longer be a requirement that the seller's current mortgage payment be greater than 31% of their current gross income.
3. HAFA no longer requires the sellers financials be reviewed for qualification.  However, the servicer or investor may still require it.
4. Payouts to subordinate liens are no longer limited to 6% of the subordinate liens outstanding principal balance.  The Max aggregate payout is still capped at $6,000.  It is now up to the investor to determine their allowable %.
5. Real estate commission cannot be cut to less than 6%, even when pre-applying for the program.  This was a major negative previously.
6. Servicers are now required to respond to short sale requests within 30 days, whether the files was pre-applied for or not.  We'll see about this one.  They don't meet the timeline requirements now, so I don't see that changing.

In all these updates to the program should remove some roadblocks that have disqualified seller's in the past.

Unfortunately, not all of the negatives to pre-applying for HAFA prior to having a purchase contract have been removed.

1. Seller's may still be required to pay mortgage payments equal to 31% of their gross income during the marketing period after pre-applying.
2. Lender's doing their value determination when the property has not been marketed and there are no offers from the market often come in higher than future buyer offers do.  So pre-applying is still a gamble when it comes to the lender's determination of value and should it come in high, limited ammunition is available to dispute it.
3. An value that come in higher than the market is willing to pay can doom a seller to having to accept a deed-in-lieu of foreclosure.  Having a full marketing history and offer to show the BPO agent is always the best strategy to combat and unrealistic value.  Whenever possible this is my suggestion.

I believe these changes to the program will allow many more sellers to sell their properties via a HAFA short sale which will afford them a full release of liability on the loan when the house sells.  This will allow them to move on with their lives.

On caveat to this update.  This update is for non-GSE loans only.  So these changes are for non Fannie-Mae and Freddie Mac loans.  The 2 GSEs have their own versions of HAFA and their own guidelines.  We will have to wait and see if they implement these changes also.

Sean Wilder

Short Sale Industry Update

Posted on 22. Dec, 2010 by ctlms in Foreclosures, My Blog, News, Real Estate, Short Sale

So what's happening in the short sale world these days?

So being the end of the year I figured it is a good time to discuss in general what we are seeing in the industry as far as trends and timelines.

This year has seen a lot of changes mostly from Gov't intervention.  The largest of which was the HAMP program and then the addition of the HAFA program to it.

The HAFA program covers a huge majority of non-FHA or VA loans.  This means that if your seller doesn't have a FHA or VA loan it is very possible that they may be eligible for HAFA.

The biggest reason for a seller to want a HAFA short sale over a traditional short sale is the guarantee of a full release from the deficiency balance.  In a traditional short sale there is no guarantee of that and it is something we must vigorously negotiate for.

This program has great benefits for the homeowner but adds a lot of time to the process and has many pitfalls that we must avoid whenever possible.  So even though the intent was to streamline the short sale process, it is by no means an easy thing to work with.  That is of course unless you don't care about commission cuts, and required mortgage payments and deed-in-lieu requirements, etc.  But that is another discussion.

Now that this program is several months old we can look back and evaluate it and the general short sale process as a whole.

For the most part HAFA has added some extra time to the short sale process, even for loans that are not HAFA.

90 Days is about average for a traditional short sale but with some lenders 60 days is more common.  HAFA adds at least 30 days to that process and with some lenders as much as 60 days.  So much for streamline.

So on average we are looking at 60-90 days for non-HAFA and 90-120 days for HAFA.  Still no "short" process.  But we are seeing a good retention rate for buyers that have this fully disclosed to them at the beginning.

When the buyer knows up front that it will be 90 days before their offer is approved or denied, and they receive at a minimum a weekly update throughout that process, they are hanging in there.

This year we have had a better than 90 percent close percentage on our short sale files that have received offers.  Some of them may not have closed with the 1st buyer, but they closed.

Now those that never received offers.. there's not much we can do for those other than see if the seller qualifies for a Deed-In-Lieu of Foreclosure.  This is worse for the seller's credit, but not as bad as a foreclosure.  And of course we and you, the real estate agent, get the short end of the stick as we do not get paid.  But we did our best for the client.

Overall the short sale world has changed a bit this year but really just in the minutia of the process.  In the end it is still the same thing.  The seller needs a hardship and the bank needs to believe they are getting the best offer they could get for the property.  The rest is just paperwork, faxes and phone calls.. A lot of them.

My biggest take away from the past year is a suggestion that I have always made.  Get started as soon as possible.  Some of these available short sale programs allow us to start before there is an offer, saving time for the buyer.  Although that is not always advisable due to certain negatives.  But when we are fully prepared to submit a short sale package to the lender, before an offer comes in, we are all at a huge advantage.

Don't forget, even before you list a property that we are available to answer your questions and your seller's questions.  We want to be involved from the very beginning so we can help you to set the proper expectations with all parties involved and avoid any potential pitfalls that may be on the road ahead.

On a personal note I want to thank all of you who have used our service this year.  We have been able to help dozens of homeowners avoid foreclosure together over the last 12 months.

Here's to the new year and have a Happy Holidays from us here at Loss Mit Services.

Sean Wilder

The Ins and Outs of Bank of America and Equator

Posted on 02. Dec, 2010 by ctlms in Foreclosures, My Blog, News, Real Estate, Short Sale, foreclosure

Some Hate it and others Love it!

Anyone that has dealt with Bank of America this year during a short sale has heard of Equator.com.  In fact some other lenders such as GMAC us this online platform as well.  But Bank of America has fully incorporated this system into their short sale process.  Let's talk about the system and how to use it properly.

Some people I have talked to just Love Equator because it is more hands off and requires fewer phone calls and no faxing to the lenders.  Others Hate it for the same reasons.

I myself just use it to the best of my ability and try my best to avoid it's negatives.

Eqautor.com, formerly REOTrans.com is an online interface used by Bank of America and others to facilitate communication and document collection between the seller's representative and the bank.  The system was designed assuming that the seller's representative who would be communicating with the bank would be their real estate agent.  This created some challenges for anyone that was not a licensed real estate agent to negotiate the short sale, such as an attorney or short sale negotiator.  Recently they have added access for attorney's but there is still no clear way to get an account if you are not an attorney or licensed real estate agent.  Good thing I have that license also.  We have been using Equator since Feb. 2010.

The key feature that many people love about this system is that you can initiate a short sale without calling the bank or faxing anything in.  You just enter in some information about the loan and once the file is opened, you upload your 3rd Party Authorization form into the system to be reviewed.

Once that authorization is accepted, tasks are assigned to you to upload short sale documents and enter the offer information.  You will need to have already prepared an estimated HUD-1 for this and gathered the buyer's name and address along with the contact information for their agent and lender.

There are some fields that are asked for that we usually do not enter the correct information and have never had an issue.  The system asks for the buyers first 5 digits of their social security number.  This is none of their business to start with and that limited information is useless anyway so we just enter 000-00.  Same goes for their birth date.  Just pick a random date.  We also use the area code and 555-5555 for any of the requested phone numbers except that of the buyers lender.  The person processing the short sale on behalf of the seller should be the only point of contact for any requests for information or documentation from the lender.  This avoids delays and confusion down the line.

After the offer is fully submitted a value is ordered and after that value comes back to the lender a counter offer is usually issued.  This is common and is a way for them to see if the buyer will come up any.

After the counter offer phase, and if the offer meets the investor's (who owns the loan) minimum net proceeds the offer is submitted for approval.

If approved the file moves to a closing officer and the short sale approval is issued.

This all sounds pretty simple and straight forward but there are things that can totally blow up your transaction.  All the hype that  Bank of America has put behind this system has lulled many into forgetting that you actually need to know what you are doing.  If you let the lender guide you through the short sale the way THEY want you to do things, you may not be protecting your client fully.

Here are some tips.

1. If possible, use the services of someone who is very familiar with the system and the lender.
2. Fax your authorization into the lender before initiating the short sale on Equator.  Call to verify it is on file and make sure the loan is to be processed through Equator.  FHA and VA loans along with some HELOC loans do not go through Equator.
3. Call Short Sale Customer Support if you aren't getting updates through Equator or responses to requests for updates.
4. Be sure to have everything you will need for the short sale before you initiate on Equator.  Equator tasks have expiration dates and if you fail to complete them in time, the file will be closed automatically.
5. If you know what closing costs the lender never agrees to pay, you can save a lot of time with the offer-counter offer process.

These are just a few tips of the many ins and outs it takes to successfully navigate this system on a regular basis.

Equator can be a great tool for speeding up the short sale process if you know how to use to its best.  We have had short sales approved using it in as little as 3 weeks.  But I have seen many agents get completely frustrated and huge delays caused due to inexperience with the system and the knowledge to work around some of it's challenges.  This is especially true of "unique" transactions where the developers of the system could not have foreseen your issues.

Hope these tips help shed a little light on this system.

Sean Wilder

Owner, Loss Mit Services

Call us with your short sale needs 860-265-3727