How do the time lines and processes work for a short sale process that then turns to HAFA?

Asked by Bronstine, Las Vegas, NV Mon Jun 7, 2010

I'm the buyer in a short sale that was set to close 6/16/10, offer accepted by the owner in February , approval letter from the bank received mid-May. Today (6/7/10) I find out that the bank (B of A) won't release the owner from the deficiency because his loan is not one of the gov't sponsored loans, so the owner is going through the HAFA program. According to the B of A information I found, the HAFA process is integrated into their Equator system. Does this mean the process starts all over? Could the negotiated price change, or the property be re-listed and other offers looked at? If the owner is okay with the price and the bank has already said okay, is there any chance I could lose this house? As of this news I am expecting that closing by 6/30 and getting the homebuyer's tax credit is a slim-to-none possibility. Does anyone have any insight, experience, or suggestions? This is making me crazy!

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Dawn Barrier, Agent, Las Vegas, NV
Sun Dec 12, 2010
Hi Bronstine!

It has been a while since you first posted....
Just curious if this deal went thru with you?
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Cameron Novak, Agent, Corona, CA
Sun Dec 12, 2010
HAFA can slow down the process, but there are some good benefits of the program if you qualify.

Corona Short Sale Agent
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Dawn Barrier, Agent, Las Vegas, NV
Fri Jun 18, 2010
Good info in the First Answer. You really need to get with your agent on these ?'s as well.

There are so many "ifs" when dealing with short sales. Sometimes it does have to be started all over. Good news is recently Equator deals seem to be running much faster in my experience.

You may get lucky with the tax credit extension most likely to be extended until September
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Michael Mads…, , Las Vegas, NV
Tue Jun 8, 2010
Wow, there's a lot of room for speculation here. I am not a licensed attorney so do not take any of this as council and merely a thoughts and experiences posted on a blog.

HAFFA was designed to help homeowners who are unable to retain their home under the Home Affordable Modification Program (HAMP), and provide incentives in connection with short sales and deeds-in-lieu of foreclosure.

The clause relating to Deficiency gets grainy. HAFFA requires borrowers to be fully released from future liability for the first mortgage debt and, if the subordinate lien holder receives an incentive under HAFA, that debt as well (no cash contribution, promissory note, or deficiency judgment is allowed). So this opens up even more questions.

Question: Does the seller even qualify for HAFFA? Is the home owner occupied or was it vacant? If the home was vacant, this home could be looked at as not being the sellers primary residence.

Question. Is there a 2nd mortgage? Without even having to contact the listing agent, tax records could tell your agent what the last sale of the home went for. Not always, but usually if the loan amount was 80 percent of the sale amount, chances are the home sold with an 80/20 loan. There could be a 2nd loan that is not getting an incentive that would not work under HAFFA. If that is the case, the 2nd could retain the right to pursue a deficiency from the seller.

Before I go further, ask your agent if they attended last months town hall meeting with Bank of America. Bank of America sent an executive to help agents with their questions and concerns regarding current, past and future escrows with Bank of America. If you’re agent did not attend, they could gain a wealth of information from those who attended with your questions. Have them ask their broker or others who attended.

I attended because I was representing a seller with a short sale who wanted to make sure any deficiency that could arise would be removed before finalization of the sale. I learned bank of America would not guarantee in words a deficiency would be removed. They wanted to reserve the right. In the exec’s words; “If we find out the seller owns an RV, we would want the opportunity to suggest they sell it and work a little harder on the deal”.

There’s a world of scenarios out there that can hold up this deal just revolving around the deficiency concerns of the seller. Equator was simply an online program that has been integrated with processing bank owned homes. At the beginning of this year it was fine tuned to help with speeding up the short sale process. If the seller can let go of the deficiency concerns, you have a good chance to move forward. The seller may entertain the idea of filing BK in the future, giving you happier days ahead in your new home.

Short sales are embarrassing for sellers and difficult to understand for both parties. To learn more about short sales and HAFFA, I suggest the site below for government links and more information.

Good luck,

Michael Madsen
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