17Jan11 CNBC Short Sale and Foreclosure Forecasts for 2011 and a HAFA Revamp

Came across this article from CNBC last week discussing the impact HAFA has had (read: not what was expected!)

The treasure department says the following

“While HAFA has been widely credited with streamlining the short sale process by setting clear timelines, documentation requirements and procedures, feedback from various stakeholders including servicers, housing counselors, realtors and others supported that additional enhancements could be made to further streamline short sale transactions, to the benefit of homeowners.”

As a result, HAFA rule changes include the following:

A recent report from the folks who oversee the TARP (the Congressional Oversight Panel) said that the Treasury has spent just $4.3 million on HAFA for 661 short sales. So Treasury, last week, decided to change the rules a bit:

  • HAFA no longer requires that servicers verify the borrowers finances
  • HAFA no longer requires servicers to determine if the borrowers monthly payment is higher than a 31 percent debt-to-income ratio.
  • HAFA no longer requires second-lien holders to agree to accept 6 percent of the unpaid principal balance owed them, up to $6,000. Servicers now decide who gets paid how much, with a cap still at $6000.
  • HAFA now requires borrowers seeking a short sale get an answer/agreement within 30 days.

We have criticized HAFA since its inception and are not surprised at all to see it faltering. That said, the guidelines mentioned above look like they provide marginal improvements, but not enough to drastically change anything. In particular, one we wrote about in an earlier blog post:

Removing the case-by-case analysis that short sales need: Every short sale transaction is different, and lender should approach them as such. HAFA requires lenders to identify their minimum net proceeds ahead of time, and the guideline requires 120 day period to change that value. This means that if a property falls outside of the minimum net proceeds, it isn’t eligible under HAFA. That’s a shame; because the house is worth what the house is worth, and even in the span of 120 days the criteria used can change. It removes flexibility from the process, which is critical when handling these transactions.

This was not adjusted and really makes it difficult for lenders to truly handle transactions on a case by case basis.

What are your thoughts on the market forecast and the HAFA program?

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9 Comments Posted by in Market News
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  • http://www.houserefinancecenter.com Laura Morton

    HAFA should be scrapped. It just doesn’t work. HAFA is too hard on second lien holders. To have a cap of $6,000 is ridiculous. Why would any investor get involved in second mortgages?

  • http://www.houserefinancecenter.com Laura Morton

    A short sale is a specialized area of real estate. Changes to HAFA will have a small positive affect. The bank holds the trump card. To make the short sale system work, the banks need to set up a department just for short sales.

  • http://pulse.yahoo.com/_2QNTIA4KLDWJYLUQHXFJX64VFM Sophie Burner

    In my opinion the problem is most Americans do not understand the process of a short sale. It is one of the most difficult processes to go through alone without expert assistance. There
    are two reasons why a bank would grant a short sale to someone: there
    are hardships with the seller of the property and the seller of the
    property has more money owed on the mortgage than what the home is
    actually worth. Hardships that the banks look at when going for a short
    sale are instances such as unemployment or income that has been reduced
    due to the economy, divorces, bankruptcies, medical emergencies, and/or
    a death in the household.

    I must stress that before you go about beginning the process of a short
    sale it is important to seek help from the experts in the short sale
    process. Once you seek assistance your will go through the process of
    creating a financial package to submit to the bank you are using for the
    short sale. The key here is that each bank will possess a different
    process for the financial package, but each will have similar basic
    procedures by which to go by.

    Normally once the short sale process has begun the bank will acknowledge
    acceptance of the package and a negotiator will be assigned. Next, a
    broker’s price opinion (BPO) will be ordered by the bank and an
    additional negotiator could be allocated to the short sale. It is not
    over yet, there is more. Once all of this has been completed the next
    step is for the package to be sent for evaluation or it is sent to the
    pooling servicing agreement where it is scrutinized. After that the
    bank will more than likely demand all people involved in the short sale
    to sign an affidavit known as an Arm’s Length Affidavit. If everything
    goes well and as planned, the bank will issue an approval letter. All
    of this can take easily over a year to finalize. 

    Source: http://www.the-short-sale-process.com/

    • http://www.totaltab.com Nick Reuter

      I don’t necessarily agree that every that “it is important to seek help from the experts in the short sale process”. It’s not brain surgery – our blog posts decipher a lot of it here. But I do stress that everyone should do their research and consider whether they are in fact a good candidate for a short sale. 

  • Mike Lewis

    Nice information about the concept and its importance that
    HAFA provides financial incentives for service’s and borrowers to do short
    sales selling the property for less than the value of the mortgage and deeds in
    lieu of foreclosure basically just giving the property back to the bank. Really
    you have done a good job.  Borrowers can
    apply to do the HAFA short sale prior to even listing the property for sale or
    obtaining an executed contract.  In some instances, borrowers have been
    able to obtain a pre-approved short sale list price so that they are able to
    more efficiently market the property to prospective buyers and get the short
    sale closed in much less time. Thanks for Sharing.   
    sale my house 

  • Mark Paul

    Blogs are so informative where we get lots of information on this topic. Nice job keep it up!!
    Nice blog on Short Sale Foreclosure.
    Keep sharing more & more…..

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  • http://azeasyshortsale.com/ Dwight Miller

    HAFA Programs are ramping up, with Bank of America announcing 5/15/2012 they will pay up to $30,000 for a short sale, see http://azeasyshortsale.com/get-paid-up-to-30000-for-a-bank-of-america-short-sale/ for details and a video on their announcement.  I also attended a B of A webinar after this announcement and they said that HAFA short sales are now 25% of the short sales they process.