Home Affordable Foreclosure Alternatives Program Reactions

"The servicer’s willingness to approve and accept a DIL is contingent upon the borrower’s ability to provide marketable title, free and clear of mortgages, liens and encumbrances."

It's up to you to satisfy the secondary lien holders.p>

Question: If you automatically agree to a DIL, but can't provide clear title, what options does that leave you?

Treasury: [Your loan] would not be eligible for the program.

"Pre-approved short sale terms prior to the property listing."

Hey, did you know that there's water damage, and the dishwasher is gone, and half of the electrical outlets don't work, and the deck is a safety hazard? No? That isn't reflected in your required net proceeds? Huh...

"Each participating servicer must develop a written policy, consistent with investor guidelines, that describes the basis on which the servicer will offer the HAFA program to borrowers."

Question: Do we get to see these guidelines? As in: prove that they actually exist?

Treasury: No, you do not get to see the guidelines. However, the written guidelines are submitted to the government. It's up to you to determine if a bank has broken those guidelines, [the very same guidelines that you can't know about].p>

"Servicers may not solicit a borrower for HAFA until the borrower has been evaluated for a HAMP modification"

You have to wait until you are kicked out of HAMP to tryout for the HAFA. The only way to get this to speed up is to specifically ask for a short sale.p>

"Though not a HAFA requirement, it is expected that servicers will, in accordance with investor guidelines, perform a financial analysis to determine if a short sale or DIL is in the best interest of the investor, guarantor and/or mortgage insurer."

It is stating that the bank will act in their best interest. At least they're up front about it. But if it was in their best interest to do a short sale, why are we giving them money?p>

"The results of any analysis must be retained in the servicing file."

Can we see this file?

"The HAMP base NPV model does not project investor cash flows from either a short sale or DIL and should be used only to determine borrower eligibility for a HAMP modification."

I have a feeling that this will come up. Maybe not often, but when it does, make sure to quote this to the bank.p>

"If financial and hardship information is documented and verified, [from HAMP] no additional financial or hardship assessment is required by HAFA."

>Hooray...

"However, in accordance with investor guidelines, the servicer may request updated financial information to evaluate the borrower."

...Dang it! That basically negates the first point! That's what they're doing now.p>

"The servicer must, independent of the borrower and any other parties to the transaction, assess the current value of the property in accordance with the investor’s guidelines."

It all comes down to the "investor’s guidelines"! I wonder if those "investors" (more like speculators, burn!) will be completely rational and logical.p>

[If they're rejected] "The notice must explain why a short sale or DIL under HAFA cannot be offered, provide a toll free telephone number that the customer may call to discuss the decision..."

Well that's nice, at least. I wonder how knowledgeable the minimum-wage right-out-of-high-school employees will be at the toll free number. I also wonder if those same kids will have any power over the situation whatsoever.p>

"Prior to approving a borrower to participate in a HAFA short sale, the servicer must determine the minimum acceptable net proceeds (minimum net) that the investor will accept from the transaction."

My apologies to the policy writers, consultants, and government employees who helped draft this. I'm sure you have our best interest at heart, but I have to say: That might be the dumbest sentence I have ever read in my life, and I've been on the Internet. Without even going inside, without knowing what it would truly sell for, without even looking at it, the bank is going to determine what they will end up with. That hurts the brain.p>

"A servicer’s policy for determining the minimum net must be consistently applied for all loans serviced for that investor."

Well, at least there's that.

"The minimum net may be expressed as a fixed dollar amount, as a percentage of the current market value of the property, or as a percentage of the list price as approved by the servicer."

The bank approves the list price, AND the net proceeds?! Are banks in the business of real estate now? Because that's what it looks like.p>

"After signing an SSA, the servicer may not increase the minimum net requirement until the initial SSA termination date is reached."

But after the 120 days, they can increase it.

"In determining the minimum net, the servicer must consider reasonable and customary real estate transaction costs for the community in which the property is located and determine which of these costs the servicer or investor is willing to pay from sale proceeds."

>BEFORE they even start, they set what they will and will not pay! Who guesses that their payment plan will be: "as little as we can get away with"?p>

"Either proactively, or at the request of an eligible borrower, the servicer will prepare and send an SSA to the borrower after determining that the proposed sale is in the best interest of the investor."

Tell me again, if this is in the best interest of the investor of the loan, WHY are we giving incentives to them?

[Regarding the requirements that all SSAs must have]

"[S]servicers may amend the terms of the SSA in accordance with investor requirements..."

What? WHAT?! Did you just gave them free reign to do whatever they want? A friend of mine said: "Yeah, they can change it, but they can't make it any worse." We just laughed and laughed.p>

"...borrower will be entitled to a relocation incentive of $3,000, which will be deducted from the gross sale proceeds at closing."

Ah, so the net proceeds has to work around that: meaning that BUYERS NEED TO PAY MORE.

"The borrower must sign and return the SSA within 14 calendar days from its Effective Date along with a copy of the real estate broker listing agreement and information regarding any subordinate liens."

The seller is responsible for getting a competent agent and gather ALL documentation regarding any liens within two weeks (calendar, not business, even). Real nice, guys.

DIL Terms. The following terms apply to a HAFA DIL:

"The borrower must be able to convey clear, marketable title to the servicer or investor."

The poor people have to deliver clear title for a DIL?p>

"Servicers may not charge the borrower any administrative processing fees in connection with HAFA. The servicer must pay all out-of-pocket expenses..."

Great! Even though they will add those fees onto the debt if the seller can't sell. I can totally see some lenders trying to get people to do this, though. Watch out!p>

"A mortgage loan does not qualify for HAFA unless the mortgage insurer waives any right to collect additional sums (cash contribution or a promissory note) from the borrower."

GAAAH! More people to appease.

Question: How long do the servicers have to get insurer approval?

Treasury: The servicer 'should' do this before they started the HAFA, but it is not in the guidelines. There is also no timeframe limit. It's up to the servicer to decide on what they want to do.p>

"Investor Reimbursement for Subordinate Lien Releases. [...]
This reimbursement will be earned on a one-for-three matching basis. For each three dollars an investor pays to secure release of a subordinate lien, the investor will be entitled to one dollar of reimbursement up to the maximum reimbursement of $2,000."

Question: If the subordinate liens are being paid out of closing (up to $6K), but this doesn't affect the NET proceeds... why are we paying them money?

Credit Bureau Reporting:

The information below is consistent with 'CDIA Mortgage and Home Equity Reporting Guidelines in Response to Current Financial Conditions' (May 2009).

Reporting should be as follows:

Short Sales
- Account Status Code = 13 (paid or closed/zero balance)
...
Deed-in-Lieu
- Account Status Code = 89 (deed-in-lieu of foreclosure on a defaulted loan)

I KNEW IT! Which one looks better, hmm? HMM?!

"By signing this letter, you are agreeing not only to a short sale but also to a deed-in-lieu of foreclosure if a short sale is not successful."

Question: You have 120 days to sell and then you agree to a DIL?

Treasury: This is an optional provision that the servicer can put in there and yes, if you sign it, you do have to do a DIL.p>

"Optional", eh? But this is confirmation that if you (or your Realtor that you had only two weeks to get) can't sell it, it automatically goes back to the bank. READ THE CONTRACT!

"We are not responsible for the accuracy of the list price and have no responsibility to you in the event the property is not sold."

AAAAAAAAAAAAAAAAAAAAAAH! But YOU pre-priced it! AAAAAAAAAAAAAAAAAAAAAAH!

"Seller may cancel this Agreement prior to the ending date of the listing period without advance notice to the broker, and without payment of a commission or any other consideration, if the property is conveyed to the mortgage insurer or the mortgage holder."

It's cancelled if you do a DIL? Is there any other way to cancel it? Please?

Partial Mortgage Payments

Need I say more?

"The Buyer agrees not to sell the property within 90 days of closing of this sale."

Question: Why is this in here?p>

Treasury: It was put in there to prevent fraud.

Follow up Question: How many instances of fraud have there been in the past, say, three years?

- Treasury was unable to provide any data.p>

"We may initiate or continue the foreclosure process as permitted by the mortgage documents; however, we will suspend any foreclosure sale date until the expiration date of this Agreement..."

If this fails, they'll start immediately back up. Just like normal.

Regarding the termination of the agreement:

"g.[Insert only if applicable:] You do not make the payments required under this Agreement."

Interesting, perhaps certain lenders won't require payments? Hahahahaaa. I kill me.

Under Seller responsibilities:h3>

"[You, the seller, must] Be able to provide the buyer of your home with clear title... You will need to either pay [any subordinate] loans off in full or negotiate with the lien holders to release them before the closing date. Under this program, you must make sure other lien holders will agree not to pursue other legal action related to the pay off of their lien, such as a deficiency judgment."

I'm sure that people facing foreclosure are MASTERS of negotiation.

"We may allow up to 6% of the unpaid principal balance of each loan (not to exceed an aggregate of $6,000 for all the loans in total) to be paid from the sale proceeds to help get a lien release."

So that takes care of the "settle all liens before closing problem. At least the homeowners don't have to deal with the other lien holders. What's that? What do you mean "We MAY allow"?

My guess is that subordinate lien holders will now demand as much, or (if they're owed a lot), will refuse to participate.

"You may not have any agreements to receive a portion of the commission or the sales price after closing. Any buyer of your property must agree to not sell the home within 90 calendar days of the date it is sold by you. You may not have any expectation that you will be able to buy... your house back after the closing."

Why is the 90 day thing sandwiched in between the arms-length transaction verbiage? That's just weird.p>

"If by the termination date of this Agreement, you have complied with all your responsibilities but are unable to sell your home, we will allow you to convey ownership of your home and all real property secured by your mortgage loan."

I love the "we will allow you to give us the house," because they're just so nice.p>

Although, if it's your principal residence (at least, in Oregon), a foreclosure sale is basically the exact same thing as a DIL, credit-wise and the fact that they can't come after you for the debt. The only difference seems to be the $3,000 that you get for relocation.p>

However, in the past people have just been squatting, letting it go back to the bank, and many institutions are letting them live rent-free just to keep the homes occupied. $3,000 or free rent. Hmm... *

* Please do not take this as "professional advice," seek a competent attorney before you make any big decisions. Come on.

The net proceeds available to pay off the first mortgage loan are insufficient, due to:

• [ ] Contract sales price is below list price stated in Short Sale Agreement
• [ ] Net proceeds amount is less than acceptable net proceeds stated in Short Sale Agreement
• [ ] Excessive financial concessions
• [ ] Excessive commissions
• [ ] Excessive closing costs
• [ ] Excessive payments to subordinate liens/mortgages OR release of subordinate liens did not occur

I'm torn. Should I be enraged by the fact that they have checkboxes (CHECKBOXES!) to tell you how you were declined, giving no more information, or grateful for the fact that it's far better than what we have now?

Under the heading: "How Does a DIL Work?"

"You must also be able to deliver marketable title free of any other liens. We will contribute up to six percent (6%) of the unpaid principal balance of each subordinate lien, not to exceed a total of $6,000, toward paying off any subordinate lien holders."

Remember, that 6% comes out of the GROSS proceeds of a short sale, so the bank pays nothing, really. They only actually pay out of pocket for a deed-in-lieu. It seems that the DIL is not in the bank's best interest. I approve.