Here is what we have seen and witnessed first-hand on why HAFA won’t work:
1) It’s a government program. Name one that works correctly and efficiently…do you need more elaboration? Oh good because we’re going to.
2) The seller must make mandatory “minimum” payments during the process. Last time I checked the reason you do a short sale is because you have a hardship (I.E. no money, loss of income, etc.). This is one of the key components of it where the seller makes the payments, the bank doesn’t get an offer (because of their idiot valuation techniques, see below) and then they foreclose. Good thing they got a minimum payment from that seller for 3 months though (or longer).
3) The “pre-approved” price – ah the golden ticket that makes life great for a realtor again right??? WRONG!!!! The pre-approved price has parameters (known as investor contractual restrictions) that state certain criteria such as, but not limited to, commission can only be 2% total (yes this is one investor that is participating guideline), no money for 2nd liens, they won’t pay recording fees, courier fees, HOA dues, HOA transfer, taxes, etc. So who ends up paying this? The seller with their 3k “incentive” (this most likely will just cover HOA dues or possibly the junior lien) and then the good ole greedy agents out there can pay the rest out of their commission (always a fun time). Pre-approved…ha we were better off with the guessing game. One other great investor contractual restriction (I wish I was making this up) is: The preapproved value must be 150% of what the fair market value is.
4) Streamlined paperwork – government forms at their finest! 52 pages of government forms for the realtor and homeowner to fill out! Oh and don’t forget to send us all the other standard documentation (wow so streamlined). And then there is the mighty catch….we lost a paystub, your file is declined. We lost the cover sheet to the fax, your declined. Oh and here is the best part…if the seller doesn’t pick up the phone when the bank calls, the file is declined! Ain’t that rich! No wonder this will be streamlined, no short sales will ever be approved! Yay REO central here we come!
5) The program will not work because there are too many variables, just like it’s very unsuccessful brother HAMP (the modification program). Through an investor, an investor’s investor, Mortgage Insurance (which may or may not participate…more to come on that later) and then Pool Mortgage Insurance and guess what….you have 4 cooks in the kitchen and the meatloaf was just burnt.
6) Valuation for pre-approval/approval of short sale – they use ZILLOW!!! This is considered a “fair market value” appraisal technique. Are you kidding me??? According to Zillow we would be rich…guess what we’re not rich!
7) Once the home sits there for 90 days with no offers, bloop next day it can go to foreclosure! Yay America….we are on the road to recovery. What a joke.
Here is our most recent HAFA short sale (in all its streamlined glory)
Didn’t know this one was HAFA, sent all documentation like a normal short sale. Got everything in, reviewed, assigned to a processor, BPO ordered (on 4/9/10). Called on 4/12/10, 4/15/10 and 4/19/10 and was told “This loan is HAFA congratulations.” To which I respond “Oh god what does that mean for this investor?”
Here is what we are facing now:
Have an offer of 260k, according to their valuation technique (ZILLOW) the home is worth 315k. Last sold comps are 240k, 250k, 270k, offer is within line. They also tell us “Seller must make a minimum payment” (I’m thinking maybe 10% of mortgage around 200 bucks). They tell us “This investor requires the seller to make their full payment every month during the short sale process (umm hello….really?? where is the incentive for the investor to take a short sale if the seller is paying their full mortgage payment every month). Luckily on this one I don’t have a junior lien but there is HOA…and guess who is going to pay for it????
Needless to say, we are not impressed with this joke of a program. I want to go back to the old days of banging my fist against the desk, not my head. More to come on this late breaking government catastrophe.
If you’ve been “selected for HAFA” please contact me to fix your situation.
I like the idea of “pre-approved” short sales – at least the idea that the seller can get pre-approved. I don’t think it will really work to pre-approve a property. Whether or not HAFA makes short sales any easier is yet to be seen. Steve do you have a reference to where banks are allowed to use Zillow? For years many lending institutions were using automated valuation models to lend on second mortgages – they just aren’t as reliable as humans (either appraisers or agents who do BPO’s) in valuing properties.
.-= Carolyn Gjerde-Tu´s last blog ..April 2010 – Davis Real Estate News =-.
I can’t believe they use Zillow for their valuations. Typical.
.-= Braxton Beyer´s last blog ..What does “Call First – Go” mean to you? =-.
For a pre-approved price, I am not surprised that they are that lazy.
I’m curious where you found information showing banks were using Zillow “zestimates” as a basis for a home’s value as well. While some of them are fairly close to market value, others are extremely overinflated.
.-= Charles Richey´s last blog ..A Rise in the Condo Market =-.
Make sure you keep the right papers, double check all your papers. ask your realtor questions dont hesitate to inquire.
.-= Arizona Homes For Sa´s last blog ..Live And Enjoy Here In Phoenix, Arizona =-.
Interesting post. I have to say using Zillow to value properties is not only lazy its so inaccurate. Thats just crazy. Although the general public refers to ‘zestimates’ in conversations all the time.
lol nice story man.