Archive for the ‘HAFA’ Category
Tuesday, November 29th, 2011
Short sales are a big part of our real estate reality, and they are not going anywhere anytime soon. Although the relief of getting out of a mortgage that can no longer be maintained is usually a blessing for sellers, there is also an added benefit in some cases, of getting a check from the bank at closing.
There are several current programs that offer to pay sellers at the close of escrow on a short sale:
HAFA. The Home Affordable Foreclosure Alternatives program (HAFA) gives qualified sellers up to $3000 at closing. This program applies to both short sales and deeds in lieu of foreclosure. Click here for more information on HAFA and to see the requirements.
Transition Assistance Program (TAP). This is a Calfornia program that nets qualified state homeowners up to $5000 at completion of a short sale or deed in lieu of foreclosure. Click here to check eligibility and get information.
Bank of America Cooperative Short Sale Program. This program is available to any B of A loan holders who are doing a short sale, and provides up to $2500 to those who qualify. The difference between this program and HAFA is that B of A preapproves the home for short sale, including the list price (which could be an issue). A 4 month time frame is given in which the agent must sell the home, and at the end of that time if the home has not sold B of A will issue an automatic deed in lieu of foreclosure (which could be a problem). Speak with your agent if you are not sure about how this program compares to HAFA, as the market time restrictions could be an issue. Contact B of A to get more information on the program.
Chase and Citi Short Sale Programs. Both of these lenders have initiated aggressive programs that pay up to $20,000-35,000. But don’t get too excited just yet…in order to partake of this program you need to receive a letter from one of these banks. This program is not owner-initiated. The banks find those homeowners whom they feel meet standards to successfully qualify. I know of one case here in La Jolla where a homeowner did receive such a letter.
Other bank programs. Some other banks are jumping on the bandwagon and offering their own short sale versions. Wachovia Bank sends letters to sellers asking them to participate in short sales, with a financial incentive at closing (between $3000-5000). Other banks have their own programs and more are sure to follow.
Many lenders are creating their own programs to bypass the HAFA program, as it limits the liability of the banks to collect money. With their own programs, controlling many of the terms of the short sale (like price and time frames), but if you are going to use any bank programs you need to understand these programs. Your agent needs to explain the differences between the bank program and HAFA, so that you can make an informed decision as to which one to choose. As I always say, knowledge is power.
Thursday, September 29th, 2011
With the economy in turmoil and people scared to make big purchases, the real estate business is undoubtedly challenged. In difficult times some people panic, and I see that happening amongst distressed borrowers, yet there is a process to the situation that you need to follow in order to have a chance to save your home and your credit. I have blogged on this topic before and it is worth repeating.
If you are in a distressed situation you need to approach it methodically, even if you don’t believe that there are options. Foreclosure should be the last resort. Here are some steps you can take to try and avoid it:
1. Contact your lender. I know this sounds horrible, but you need to start somewhere. Some lenders, like Bank of America, actually have been stepping up to help people avoid foreclosure. You need to have all pertinent information ready when you call – your loan number, employment information, bank statements, etc. You want to see if you can qualify for a loan modification. This will take some time, but you need to get the ball rolling sooner rather than later, as soon as you discover you are unable to pay your mortgage or if you have a change of circumstance.
2. Contact a counselor if your bank cannot help you. There is a wonderful free counseling organization called HopeNow that can help you evaluate your situation and see what options may be out there for you to peruse. You can reach them at 888-995-HOPE. You can find them on the web at http://www.HopeNow.com.
3. Investigate ALL other possible options. If you are in the military, there are options that may be available to you. You may be able to qualify for a deed in lieu of foreclosure, refinancing, postponement, or a reverse mortgage if you are older and have equity in your home. There are stalling tactics you may be able to use while you find a way to get yourself on track. There are government programs that may help you if you are unemployed. Investigate all options, but do not feel overwhelmed. If you speak with your lender or a counselor you can whittle down the available options.
4. Short sale. When there is no other option a short sale is better than going through foreclosure. You need to speak with an experienced agent if you are considering this option. Make sure you understand all tax and credit consequences – speak with your accountant or an attorney. Many lenders will bless short sales, and it is a good idea to work with someone experienced because they can try to get lender approval at the get-go. Some lenders are even evaluating homes now and telling the homeowners what price they will accept on the short sale BEFORE the home is listed. You may also qualify for programs like HAFA (Home Affordable Foreclosure Alternatives Program), which allows you to collect up to $3000 from your lender toward moving expenses.
It is important to understand the foreclosure laws in your state and the consequences they carry. If you are having difficulties with your mortgage please do not just give up – you need to try and find a solution before succumbing to foreclosure. Do not walk away from your home either, as that is a voluntary foreclosure. If you spend a little time you may find a solution that lets you avoid foreclosure, so hang in there.
If there are any distressed property issues you would like to see addressed in this blog, please let me know in the comment section below. If you do not see the comment section, simply click on the title to this blog and then scroll back down.
Saturday, August 27th, 2011
There has been a lot of real estate news this month, so here is the latest:
New Refinance program to help millions of troubled homeowners. The Obama administration is pushing a new program to help millions of homeowners who are unable to make mortgage payments on underwater homes. The new program would allow borrowers with Fannie Mae and Freddie Mac backed loans to refinance at low interest rates – EVEN with negative equity or poor credit scores. “Wow,” you may have just muttered…wow is right. The Federal Housing Finance Agency (FHFA) and private bond investors have to approve the programs, which is a big hurdle, since (as you can imagine) they have some concerns (I bet). The government says it is weighing alternatives to help homeowners save over $85 billion a year. We shall see.
Short sales jump in second quarter. Short sales went up 19% in the last quarter, nation-wide. The good news is that they are taking less time to close than before, with an average of 245 days from notice of foreclosure to close of escrow. In San Diego, over 4100 short sale listings have sold since the first of the year, with over 1100 currently pending (in escrow) and over 2400 active. More lenders seem to be working with short sales now than ever before, and they are usually priced well, comparatively speaking. Hopefully the long time constraints typically associated with them will continue to decrease and move toward more normal closing times.
More news on short sales. The California Association of Realtors (CAR) has been busy fighting lenders on short sales, in an attempt to get them to focus more attention on getting these sales to close quicker. CAR delivered a public lashing to the big lenders this past week, accusing them of failure to respond to short sales in appropriate time frames, dragging their heels on file processing, and other faults. CAR outlined specific plans for the lenders to follow…we shall see what transpires.
HAFA policies amended to help short sale sellers. HAFA (Home Affordable Foreclosure Alternatives Program), the government program that helps short sale sellers by giving them money to move and (supposedly) quicker approval of short sales, among other benefits, is to be amended once again. Some of the changes include: giving the borrower more time to respond to HAFA participation offers from the lenders, allowing primary lien holders to offer increased funds to secondary lien holders (which feasibly will help gain short sale approval from other lien holders – one of the biggest obstacles in short sales), and implementing stricter procedures to evaluate BPO’s (broker price opinions – like an appraisal). These are just some of the changes, but basically they will make short sale approval easier.
Median home prices revert to years past. Median home prices are reminiscent of the earlier part of the 2000’s. Some markets are mirroring 2006 prices. Areas like San Diego have fared better than others, due to a stronger employment base, lower distressed property levels, and other factors (location, location, location). Cities like Las Vegas, Phoenix and Oakland have median prices reminiscent of those more than a decade old, before the housing boom. Zillow estimates a 4.3% decline in home prices in June, year over year.
Luxury home market taking a hit. The luxury home market is taking a hit. Builders are facing more cancellations on newer homes, and buyers are feeling more hesitant to purchase these pricier properties.
Friday, August 5th, 2011
It has been a month and I have yet to hear from three lenders on approval of three short sale offers. While I know a month is not long comparatively speaking, my frustration grows on behalf of my buyers, who are all well-qualified and ready to open escrow. Amidst all the news that short sales are getting shorter (which they are, for the most part), and lender attempts to make the transactions easier to track, it makes me wonder: what do these lenders really want?
The answer should be simple: they want to get another home sold and off their books, in order to avoid the costs of another foreclosure. Theoretically we should all be on the same page – the sellers, buyers, agents and lenders. We all want to get the home sold, right?
From a logical perspective it seems selling the home via a short sale is the best bet for the lender – they save money by avoiding foreclosure (in legal fees, maintenance costs and costs of owning a home). But what DO they get by stalling? Surely there must be something, right? They have all beefed up their staff in the loss mitigation departments, created programs to enable all parties to follow the progress, so what is really happening here?
The bottom line is that banks do what they do for one reason: to make money. So if they are not working faster to close short sales it must mean there is no money in it for them, or more money to be made by going a different route. So here are some possible reasons why banks are not moving along faster in the short sale arena:
1. If the mortgage is insured, the lenders and investors can file a claim to recover some of the money if they go to foreclosure instead of agreeing to a short sale. This idea centers around the practice of lenders pooling a bunch of properties they own together, in order to sell to investors, and then obtaining mortgage insurance on the bunch. Most of the time the owners of those properties have no idea about the mortgage insurance, yet lenders try to make them pay for the losses in many short sale cases, and/or the mortgage insurance companies have to approve the sale…this is insane!
2. By keeping the short sales off the books they pay less money to the government by keeping their quarterlies down. Thus the reason some homes sit vacant for a long time…banks must make more money down the road by stalling, thus the reason many homeowners end up living in their homes rent-free for long periods before the lender evicts them and initiates foreclosure.
3. The lender may decide a foreclosure will net a higher sales price down the road, or more money in the lender’s pocket in some other way, in the long run . This reason is a bit of a catch-all…there may be other factors we don’t know about in time that will net more money for the lenders.
4. Senate bill 458, which just went into effect in July (and prevents junior lien holders from going after the seller for the money owed on the loan post-sale), although well-intended to protect sellers, could put a snag in the process as well. There are reports that junior lien holders are now asking for higher sums of money in order to sign off their acceptance of the short sale – from the several thousand many have accepted in the past to tens of thousands, which in most cases the seller cannot pay, nor are most buyers wiliing to do so.
Trying to figure out why short sales still take so long is not an easy task, but you can bet it all has to do with money. If the banks can make more by waiting or going through with foreclosure, they will. While some lenders have taken steps to indicate they do want to embrace these sales and make time frames shorter, we are all at their mercy and it is all about the money.
Monday, April 18th, 2011
In what I personally think is a big mistake, Congress announced that it is eliminating $88 million in funds for housing counseling programs. These are the programs that allow struggling homeowners and others with questions to call in and get counseling advice. It is often the first step in pre-foreclosure, or even in avoiding foreclosure altogether.
One of my favorite counseling hotlines, HopeNow, stated that it is not being shut down, but will be effected by the cuts. I have referred people to HopeNow for years. It is approved by the Department of Housing and Urban Development (HUD) and the people who work the phone lines actually know what they are talking about. The biggest complaint I have heard is that sometimes one has to hold for help for some time, but the advice is real and they really do go over specific situations and crunch numbers with callers.
Why would the government want to cut these programs? Well, I think that the government is busy trying to come up with ways to prevent foreclosures and help the housing mess by implementing new programs (of course, we have not seen these as of yet, but the most promising seem to be on the way, stemming from the robo-signing lender punishment saga). At the same time they are trying to trim our exorbitant budget, so these goals may conflict.
Many states are creating their own programs to cover the slack the federal programs have left behind after being canceled, but there are only a handful that have such programs in operation already.
So what is a troubled homeowner to do now? Some federal programs have been eliminated, not all states have yet implemented programs to help, and the mandated lender reforms (currently in the works as punishment for the robo-signing scandal) are not yet finalized. People need to know their options.
Basically there are three options, and some of them have multiple sub-options:
1. Stay in your home. To do so you may need to look into a loan modification, change of job, or a complete reevaluation of your finances so that you can eliminate or lower other expenses. You may need to get creative, consider getting a second job, renting a room or putting your young children to work (just a hint of black humor/sarcasm–of course I don’t recommend this).
2. Sell your home. If you cannot make number one work and you need to sell it will either be a traditional sale or a short sale. Either way, make sure to work with a Realtor who is experienced in your area, and if you are doing a short sale make sure that person is experienced in this regard. You also should look into the HAFA program if you are considering a short sale–at least you can get money to help with moving expenses (up to $3000–see previous posts. To find them go to the categories list to the right of my blog and click on short sales).
3. Foreclosure. This is the last resort, or course. But many times there may be no other option if you are in over your head financially, have a job loss, illness, changed circumstances, divorce, etc. Just make sure you speak with your financial planner, attorney or accountant (or all 3, in my opinion) before doing so. You need to understand all options so you can make the right choice.
As we continue to see cuts to vital programs options may dwindle, at least for a while. I have discussed multiple times how I feel states will start to jump in to help residents with their own programs, much like California has done with Keep Your Home California. If you do not yet have a program in your state I would still advise contacting HopeNow or La Raza. Your lender may have counselors available to help you as well. But do not wait until it is too late. If you are not yet delinquent on your payments you need to start researching now. Best of luck.
Sunday, December 26th, 2010
Could it be that loan modifications are actually raising debt? I read a short article today by Dean Calbreath in the San Diego Union Tribune that stated yes, they are. Mr.Calbreath points out that more foreclosures could be prevented if, instead of increasing the debt on the principal of troubled mortgages, the lenders reduced the principal. This makes sense, right?
A study released last week by a Federal Reserve branch points out that principal reductions over time have a lower chance of loan redefaults than do those with mere payment changes. But this scenario is not the case in the majority of modifications. The norm is for the lender to reduce payments only, rolling any missed payments into the loan balance. This is obviously a problem, especially for those living in homes where the value has dropped substantially. It’s simple logic: if you are given a loan modification based on current market value, meaning not only your payments but your principal balance is reduced, you may be more motivated to keep making payments.
This refusal to follow logic will not only limit the effectiveness of loan modifications, but will lead to more foreclosures down the road. According to the recent study the current loan modification practice tacks on between $7400 and $8160 to the balance of the loan. So, you ask, why are the lenders not following this logic? That seems to be another million dollar question in the sea of million dollar questions when referring to lender behavior over the last several years.
The potentially good news is that the current investigation into how banks handle loan modifications and foreclosures may have some bearing on future cases. Currently less than 40% of the potential foreclosures in San Diego county have been prevented through permanent loan modifications this year under the federal HAFA program. Maybe reducing the principal on troubled mortgages will be the new foreclosure prevention method that helps get that number up. I sure hope so.