Looking To Increase Your Odds On A Phoenix Short Sale? Stay Away From HAFA!
Let's face it. Getting a Phoenix Short Sale to the finish line is tough, and is getting tougher everyday. In April/2010, the HAFA (Home Affordable Foreclosure Alternative) Program was announced with great fanfare. Alex Charfen at CDPE felt that the program was a "game changer" for those of us specializing in short sales. I, like many others, was not very optimistic, after the complete failure of several other government programs released to date.
Unfortunately, my hesitance to "drink the Kool-Aid" proved to be the correct decision. In 2010, there were just over 600 HAFA short sales approved. Folks, that is 12 HAFA approvals per state! Yes, this program, like the others that preceded it, has turned out to be a total failure.
Recognizing the absurdity of the "success rate", the US Treasury came out with revisions to the HAFA Program. Once again, some have chosen to drink the Kool-Aid, and are "giddy with excitement" over the new changes. Here are the revisions that are meant to revive the HAFA Program:
1. Mortgage payment no longer needs to be more than 31% of the borrower's gross income.
2. Property had to be occupied during the past 12 months (It used to be 90 days)
3. 1st lenders can now offer up to $6,000 to the 2nd lien (previously, there were limited to 6% of the unpaid balance, not to exceed $6,000.
4. The lender can no longer charge the agent or seller the 1% fee for a 3rd party vendor.
5. The lender cannot reduce commissions, as long as total commission paid is 6% or below.
6. Lender now has 30 days to respond to an offer (used to be 10 days). Nice, huh?
All of these changes are wonderful, right? Well, when lenders choose to not follow these new rules, who do we turn to? The media? Our government leaders? Wouldn't it be nice to have an 800 number to call to register formal complaints against servicers/lenders who choose to continue to create their own rules? Not gonna happen folks. This is just how they want it. Make the borrowers think we are trying to do something to help, with no consequences for the lenders that continue to line their pockets come election time.
I've noticed an interesting trend with lenders lately, and how they are dealing with the HAFA. Because I've been burned by the HAFA program on several occasions, I always suggest to my sellers that we submit our Phoenix short sales in the "traditional manner". In doing this, our Phoenix short sale success increased dramatically, and we were getting responses within reasonable timeframes.
For the past 5-6 short sales we have submitted, lenders are trying to convince us that we should go through the HAFA program. Just last week, a Chase negotiator told me that she had already entered our short sale into the HAFA program, without our consent or knowledge. When I politely told her that my client did not wish to participate in HAFA, she asked for a written statement from him to that effect!
So, why are lenders trying so hard to push my Phoenix short sale clients into HAFA? I think it's a game of CYA (Cover Your Ass). With the abysmal HAFA results from 2010, banks are now going out of their way to show the government that they are doing their best to implement the program, but homeowners are refusing or "opting-out".
I also think that servicers like the thought of having 30 days to determine eligibility, setting the listing price, 30 days to respond to the offer, etc. The longer they can drag short sales out, the more money they get from the investor at the end of the day.
I have a perfect example of this with one of my favorite's, Aurora Loan Servicing (tongue-in-cheek). I will be sharing this on another blog post. Stay tuned.
The main reason that lenders now love HAFA is that there is no oversight to the program. They can simply continue to lose documents and create their own rules. There is one common problem with every government program that has been released since 2009. NO OVERSIGHT OR ACCOUNTABILITY!
Our government leaders do not give borrowers someone to turn to when lenders aren't playing by the rules. Obviously, this is how they want to keep it. Until borrowers and their agents have a mechanism for complaints, these government programs will continue to fail.
Today, the folks at CDPE are hosting a call with the US Treasury to go over the "new" HAFA program. If we are allowed to ask questions, I have only one.... When servicers/lenders don't play by the rules, who can we turn to? I'll let you know if I get a response.
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Bob Hertzog
Summit Home Consultants
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Copyright © By Bob Hertzog 2011 *Looking To Increase Your Odds On A Phoenix Short Sale? Stay Away From HAFA!*