HAFA Short Sale Guideline

Todd: Welcome to Todd Miller TV. Your resource for what’s current in the Las Vegas Real Estate Market. And I wanted to have a chat with Oana, Oana Thanks you very much for being here.So I wanna talk about HAFA which is this new Short Sale program the Government has come up with. So, tell me sort of a little overview, what exactly does it mean? What does it mean for a person getting their house, you know, that needs short sale?
Oana: Well, there are 2 programs out there. There’s HAMP, and there’s HAFA. And HAMP has to do with loan modifications. And HAFA has to do with when a loan modification is either not an option or was unsuccessful and that is where the property is being conveyed either back to the lender through a deed in no foreclosure or through the sale which is a short sale. The really nice thing about HAFA, if nothing else is 2 things: 1st of all, it outlines a time table that if you’re participating HAFA, it outlines this time table where everybody has to respond. The borrower has certain obligations during a time/this time table and so does the lender. And so that makes that very nice because now you have an expectation on how this transaction is going to proceed. The other nice thing about HAFA is that if your lender is participating in this then when all the transaction is all set and done, then you as the borrower will not have to concern yourself with the lender coming back and wanting the rest of the money so the shortage.
Todd: Okay.
Oana: Or the lender asking you sign a promissory note. So once you walk away from the property and everything’s signed and done, then it’s kinda like a get out of jail free card as far as that property’s concerned. There are some limitations.
Todd: Okay.
Oana: Some of the limitations include: it has to be an arms-length transaction, that means that your friends, your family, your business associates cannot be the buyer’s of that property.
Todd: Okay so, If I’ve/okay so let’s say I’ve got a property and it’s, I’ve got it listed right now, can I get involved with HAFA?
Oana: Yes you can. HAFA/The way HAFA is designed to work is it was designed that you would actually go ahead and list the property once you’ve already started the half of process.
Todd: Okay.
Oana: However, if your property’s already listed and you have an offer, there’s an alternative to that and half of provides for that as well.
Todd: Okay. So what I can’t do is I can’t take my house, sell it to my brother and then sort of stay there and just have that ridiculous loan amount to some small amount.
Oana: Exactly!
Todd: And maybe later on have my brother deed the house back to me.
Oana: Exacty. No, that can’t happen. It can’t be your brother, like I say It can’t be your relative, a friend, a business associate, it has to be some, it has to be a stranger basically.
Todd: Okay. What about investors? If I was investor, could I a short sale through HAFA and then flip it?
Oana: Well, the short answer is: You can’t flip it immediately.
Todd: Okay.
Oana: Okay? The property cannot be conveyed to someone else again within 90 days. So if that investor buys a property, fixes it, rented out for a few months or year, and then goes ahead and sells it, that’s fine. You just can’t change hands again within 90 days.
Todd: What if there’s a first and a second? Can/Is it that they both that is sort of forgiven, or how does that work?
Oana: Every/All the lenders that have agreed to work under HAFA will go ahead and write off that that would this be understood is that there maybe tax consequences for that and that depends on your income vs. the amount of mortgage payment. It depends on a lot of different things. So that’s something that all borrowers should go ahead and contact their tax professional to advice them on.
Todd: Okay. Relocation expenses, you know what Clovy has got this program where they’ll give up to $5,000 in relocation for the person to voluntarily short sale and move out.
Oana: Right.
Todd: Is there money in HAFA for this?
Oana: Yes. Part of HAFA program is that the borrower’s lender is going to give them $3,000 to relocate. Now, what you have to understans is that HAFA is a program. It’s not a Law. So it is voluntary. And that the lender’s policies, guidelines, investor’s guidelines, those may superceed HAFA. So that’s why HAFA’s limit is 3,000 but Wachovia offers up to 5,000. So, that’s why you got that discrepancy. But the general HAFA guidelines are. $3,000
Todd: So you could sell your house, get $3,000, walk away from the debt essentially, maybe have some tax consequences, you have to talk to your CPA about that.
Oana: Absolutely.
Todd: And, so sounds like a good program.
Oana: It is a really good program. Borrowers should really consider participating in it. If for whatever reason HAFA isn’t working the way you think it should, still proceed with the short sale because it really is a much better alternative than a foreclosure, it’s better for your credit, it’s a much less traumatic experience than a foreclosure, it is a much better deal for everybody all the way around.
Todd: Okay. So do they have to do anything, do they have to call somebody, or can they just come right to their Real Estate agent if their Real Estate agent understands? Can the Real Estate kinda help them through everything?
Oana: You know, going to a Real Estate agent’s probably your best move because they’re very familiar with the programs and they’re familiar generally with the lender that you’re working with so they can help you a lot. Now go ahead and let you/and call the lender with you right there in the office. Coach you through the whole process. And really that is just so important. Having somebody coach you through the process in invaluable. And remember, none of the cost, even the Real Estate agent’s cost are a burden of the borrower. That is something that the lender will pay for. So, it is something, it is a service that is free to the borrower and it is really an invaluable service. And remember, that Real Estate agent is representing the borrower. It’s a person who’s your cheer leader, who is watching your back, who is watching out for you, and it makes so much sense to have somebody like that on your side rather than the dealing with the bank on your own and not knowing if you’re missing something.
Todd: Great! Well sounds like a good program.
Oana: Yes!
Todd: I think the next/I think this runs to the end of 2012, doesn’t it?
Oana: It does. One of the reasons why you wanna use a Real Estate agent is because banks like the Bank of America have said that they will only process Short Sales through a portal called Equator. Well the average person doesn’t have access to something like that.
Todd: Right.
Oana: And so, there are a lot of intricacy in this and sometimes it’s just submitting the documents. That is difficult for a borrower to do. So Real Estate agents really makes the difference between a transaction which is a business transaction and transaction is traumatic.
Todd: And my understanding for the short sales that I’ve bee involved with, they will not accept a “Oh, here’s an agreement, just go for it.” They wanna see that it’s been listed in the MLS, that it’s had market exposure. The old day of “Oh, I’m a for sale by owner, I’m gonna take my house and just sell it to you and then we’re gonna go down to the title company” If they hand that over to a bank and say “We wanna short sale and here’s the terms.” They’re gonna say “Wait a minute, you haven’t had market exposure. We don’t know that you couldn’t have gotten more for the house.”
Oana: That’s an interesting possibility. And remember, like I said before, every lender has their own guidelines and procedures and investors to answer to and HAFA is a broad guideline while each bank is very specific. And generally, they do wanna see the property marketed for a period of time. They wanna make sure that they are getting market value for the property, that they are getting the most money because remember, they are having to write off a debt deficiency so they wanna make sure they not writing off any money than they have to.
Todd: Good. Anything we brought up?
Oana: Definitely, utilize the Real Estate professional, it makes all the difference in the world.
Todd: Perfect. Aright, well Thank you very much for tuning in. Thanks for coming Oana. And feel free to make some comments there, below the post if you liked it or buzz it up or something like that. Thanks for tuning in and hope to see you on the next episode.