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 2^nd 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.

A recent Ohio man had enough from his bank and bulldozed his house before the foreclosure.  Now, some may say that this is a controversial move.  In fact, 1 out of 1 persons in a recent poll said that it was the wrong thing to do.  Of course, that one person would be me.  So what led up to such a horrible action?

Why bulldoze when you can short sale?

Well, it turns out that he fell out of luck with the IRS, and as a result he fell out of luck with his bank.  I can certainly feel sympathy for the guy.  According to the story at http://www.wlwt.com/news/22600154/detail.html, he had an offer that would have allowed him to pay his debt off in full.  The bank decided that they could get more money at a foreclosure auction, and they decided to move forward with the foreclosure process.  Certainly the greed here was a major factor.

So what do we learn from this story?  Well, this guy is probably going to face some major jail time.  I can’t speak of Ohio laws, but in Arizona, we sign a contract stating that we will do our best to maintain the property’s value.  Last I checked, only in Michigan does scraping a house improve the property’s value.

The best thing to do if you’re facing a looming foreclosure is to avoid jail time.  That means that you should seriously consider a short sale instead of bulldozing your house.  Remember, you learned that lesson here.

There’s a very interesting article from ABC news that suggests it’s ok to walk away from your home.  This is certainly controversial advice.  While some may want to stick it to the lenders, it is better in the long run to short sale your home.  FHA recently stated that they will allow you to purchase again immediately to take advantage of this market.  If you do go through the foreclosure route, you will be effectively out of the market for at least 3 years per FHA guidelines.  You can read this article here: http://abcnews.go.com/GMA/mortgage-defaults-expert-brent-white-tells-borrowers-walk-away/story?id=9802435

There is also a big lesson in this story.  Do NOT touch your retirement to placate the lenders.  The banks cannot touch your retirement in a short sale or a foreclosure, so why ruin your future?  As long as we are working towards your short sale, they will not foreclose on your home.  I hope that this provides some insight into the business, and if you need help, I want to help you.

Some of the other agents have asked me how I got to where I am with foreclosure listings.  Well, like anything else, it was hard work.  We have to do many broker price opinions (BPOs), and as we do quality work, banks begin to trust us with their foreclosure properties.  Anyhow, I’ve created a page for other agents that are interested in doing BPOs.  Check out my BPO List.