Loss Mit Services

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

Short Sale Tip 10-8-10

Posted on 07. Oct, 2010 by ctlms in Foreclosures, My Blog, Real Estate, Short Sale, foreclosure

So What's Up With HAFA?

So with all this HAFA hoopla what is the skinny on this program?  What are positives and the negatives?  Let's delve into the particulars.

What is HAFA?

HAFA stands for Home Affordable Foreclosure Alternative and is a subset of the HAMP program rolled out last year.

So what's the deal, how does it work?

HAFA is supposed to "streamline" the short sale process by standardizing paperwork across lenders and shortening the approval timelines for a short sale.  Notice I said "Supposed to".

HAFA has incentives for the Servicers, Investors and Borrowers to participate.  The Servicers get paid to complete HAFA short sales, the Investors get paid for approving them and the Borrowers get $3,000 at closing for preventing them all from further losses associated with foreclosure.

All sounds good right? Well not quite so good.

First off HAFA has actually slowed down the entire short sale pipeline across almost all lenders.  Citimortgage discloses that HAFA adds about 4 weeks to a short sale.  Bank of America is 2 weeks to forever longer. (These are if not pre-applying)

The reason for the increased timelines is that HAFA allows the borrower to "pre-apply" for a HAFA short sale.  In theory that is great.  The borrower can find out if they qualify for a short sale and the bank will tell them how much they will accept.  Also, During the minimum 120 marketing period the bank will not foreclose.  Sounds Good!

But it isn't, for many reasons.  For the system in general, the negative is that there are now tens of thousands of short sales being reviewed that don't even have offers on them.  This is overwhelming the servicers and making all short sales take longer.

But that is just one negative.  Lets look at the pros and cons of the 2 ways to get a HAFA short sale done.

1. Pre-Apply

If you pre-apply for a HAFA short sale, before there is an offer, the servicer will;

a. Review the sellers financials to determine if they qualify.

b. Order a value and determine how much they are willing to accept for the property.  This can be in the form of a "net to the bank" or an "approved listing price"

c. Issue the Short Sale Agreement (SSA) for the seller and their agent to sign.  This agreement sets the terms of the HAFA program such as;

1. Length of marketing period, not to be less than 120 days

2. Commission approved, can be less than listing agreement and can be less than 6%, Except Fannie and Freddie loans

3. Amount of mortgage payment that must be made during the marketing period, not to exceed 31% of the borrowers GROSS monthly income

4. Deed-In-Lieu language.  This can state that if the borrower does not find a buyer with an offer acceptable by the lender, that at the end of the marketing period the borrower will deed the property back to the bank in a voluntary foreclosure. OUCH!

5. That the borrower will receive a full release of liability for the remaining balance at the closing of a Short Sale or Deed-In-Lieu

6. That the borrower will receive $3,000 at closing of the Short Sale or Deed-In-Lieu

Pros

1. Seller gets full release of liability

2. Seller gets $3,000 at closing

3. Saves time after the SSA is agreed to as the servicer only has to review an offer against the pre-determined approved price.

Cons

1. Commission can be arbitrarily cut below 6%, accept for Fannie and Freddie loans

2. Seller may be required to make a mortgage payment they cannot afford, to qualify for HAFA

3. Seller may have to sign agreement to a Deed-In-Lieu if a buyer cannot be found at the banks approved price.  This is at the beginning of the marketing period.

4. When the BPO is done, there has been limited or no listing history or showing feedback to help determine what the market is NOT willing to pay for the property and no offer to be considered to represent what a buyer from the market IS willing to pay for the property.  This can increase the possibility of the value coming in at a price that the market is not willing to pay and dooming your short sale to failure from the start.

2. Apply for HAFA when you have an offer

If you apply for HAFA short sale, when submitting an offer, the servicer will;

a. Review the sellers financials to determine if they qualify.

b. Order a value and determine how much they are willing to accept for the property.

c. Review the offer for approval based on the investors guidelines and BPO value.

Pros

1. Seller gets full release of liability

2. Seller gets $3,000 at closing

3. Commission cannot be cut below what is agreed to in the listing agreement, not to exceed 6%

4. The BPO agent will have your full marketing history, showing feedback and the offer to consider along with comps when conducting the value estimate.  This reduces the possibility of an inflated value. (but doesn't eliminate it)

Cons

1. The process will be longer for the buyer as the bank has not already determined if the borrower qualifies or what their opinion of value is on the property

2. Freddie Mac does not allow for HAFA applications other than the pre-application process.  So it is important to pre-apply for HAFA if the loan is owned by Freddie Mac

3. Foreclosure is not avoided while marketing the property.  Care should be taken to be sure a foreclosure date is not immanent and pre-apply if it is to buy the seller time.

My Conclusion

In most cases it is advisable to not pre-apply for HAFA in order to avoid the possibility of an inflated BPO, un-affordable mortgage payment for the seller, Possible Deed-in-Lieu language in the SSA, and commission cuts.  Oh, did I mention that during the marketing period you as the agent have to continue to report back to the bank with monthly CMA's and other reports?

In most cases applying once an offer is received is your best shot at avoiding negatives for your seller and yourself and also giving yourself the best shot at actually getting the short sale approved.  But as in all short sales, the buyer expectation on time-frame are crucial.

All that being said...It is the sellers decision on how to proceed and they should be fully informed of the pros and cons of both courses before making that decision.  After that, it is up to all of us to do our best to navigate the pot holes and avoid the negatives whenever possible.

Sean Wilder

Owner, Loss Mit Services

Call us with your short sale needs

Short Sale Tip 7-5-10

Posted on 05. Jul, 2010 by ctlms in Blog, Foreclosures, My Blog, News, Real Estate, Short Sale, foreclosure

Does the seller sign the contract before bank approval?

I have heard this question a ton of times and have seen agents argue over it.

The answer is always YES!

Let's look at the issue.

1. There is no Contract until the Offer is signed.  So if the buyer's offer is never signed, there is no binding contract holding the buyer to the purchase or the seller to the sale.  This means the buyer has not deposited an earnest money check and can walk at any point.  This also means the seller is free to accept any other offers that come in without first having to be released from the original buyer.  Not a smart thing for either party.

2. More importantly, most lenders will not accept an offer.  There must be a fully executed contract.  Many of the larger lenders such as Wells Fargo and Bank of America even require closing date extensions and other addenda to the contract and the dates must always be current.  So if something expires, it must be updated with an addendum or the short sale review stops.  Going even further, some lenders even want to see a copy of the earnest money check.  The requirements are getting more and more thorough.

In summary, Yes the contract must be signed.  It makes sense for both the seller and the buyer and with very few exceptions, the lender will require it anyway.

Sean Wilder