Katerina Gasset

Author Archives: Katerina Gasset

Good News and Bad News: Fannie & Freddie’s HAFA Short Sale Program Just Announced

Recently, Tim Burrell updated his blog to discuss Fannie Mae and Freddie Mac’s versions of HAFA.  This blog post can be read below:

“At the REO CON summit, the short sale presentation discussed how Fannie Mae and Freddie Mac loans were exempt from the HAFA short sale program that was put into effect by the Treasury on April 5, 2010.  Fannie Mae has just created its own version of HAFA with regulations that you can find at http://shortsalesr.us/FannieMaeHAFA.pdf.  Similarly, Freddie Mac has created its version of HAFA with regulations you can read at http://shortsalesr.us/FreddieMacHAFA.pdf.

Does this addition to HAFA make Realtors happy?  In general, the terms are similar to the Treasury’s short sale program that is supposed to expedite the review and approval of short sales by pre-approving the seller for the short sale and establishing the amount the lender will accept at the time the Short Sale Agreement (SSA) is entered into.  In other words, you qualify the seller and get the amount needed from the sale at the time you list the property.  However, there is a difference with Fannie and Freddie.  With the Treasury’s program, the lender considering the short payoff may tell the Realtor how much they will settle for.  For those of you who do a lot of short sales, they will specify the amount they want to be paid at closing as shown on line 504 of the HUD.

In the Fannie and Freddie program, the servicer is prohibited from telling the seller, buyer and Realtor what this amount is.  Instead, the servicer will establish an asking price based on the condition of the market in the area.  Who is better at setting an asking price: (1) the Realtor who works there every day or (2) a Loss Mitigation negotiator with files from all over America?  When the contract is submitted, you hope that this asking price results in the Minimum Acceptable Net Proceeds (MANP).  If you do HAFA short sales, you have to love the acronyms 🙂 .

Having the Broker Price Opinion or appraisal already done at the time the offer is presented is a benefit, and the servicer does not tell the Realtor what they will accept as net proceeds in most of the non-HAFA short sales (except for FHA short sales where you know to the penny).  So, in this manner the program gives a benefit of the BPO already being done and the same result as the old fashioned short sale where you play “guess again” on the amount the lender wants.  But, it could have been better if Fannie and Freddie followed the Treasury’s lead.

The other bad news is that the servicer tells the Realtor how to market the property, and supervises the marketing plan.  Again, who knows better what will work (1) the Realtor who has developed an effective program or (2) the loss mitigation negotiator who just took the HAFA training course.   The guidelines mandate that the marketing program includes ” a “For Sale” sign, Multiple Listing Service(s), flyers, print ads, open houses as well as appropriate usage of the internet;”  Few will argue with a for sale sign and putting it in the MLS, but open houses work less than 2% of the time according to NAR statistics.  Print ads have dramatically fallen because they are not that effective.  However, if you want to comply with the Short Sale Agreement you will do these things, because the agreement can be cancelled if you violate it.

Another problem is that a seller cannot be considered for a Fannie or Freddie HAFA short sale if a foreclosure is pending that could sell the property in 60 days, or if the state laws would allow a foreclosure in the next 60 days.  States like Texas can go from a dead start to a full foreclosure in less than 60 days, so does that mean you cannot do a Fannie or Freddie HAFA short sale in those states?

There are some great benefits.  The servicer must respond to an offer within 10 business days.  That beats the months of waiting we do now.  The servicer must allow at least 45 days to close the sale after approval, with a maximum of 60 days.  Also the foreclosure must be postponed during the sale period, which is at least 120 days.

The financial incentives are similar. The seller gets $3,000 in moving assistance.  The servicer gets more under Fannie and Freddie than the Treasury by receiving $2,200 for an approved short sale, as opposed to $1,500 for the Treasury.

So, like everything else in short sales, there is some good news and some bad news.  But, at least there is a program that provides some tools that a savvy Realtor can use to help a borrower in trouble.

If you need an encyclopedia of information on short sales, go to www.CreateAShortSale.com  and for the complete  Fannie Mae guidelines go to http://shortsalesr.us/FannieMaeHAFA.pdf and for the Freddie Mac guidelines go to http://shortsalesr.us/FreddieMacHAFA.pdf.

I hope this helps.

Tim Burrell

www.ShortSaleNegotiatingSpecialist.com

Raleigh, NC 919-812-5111″

Short Sale NC: Advantages of Working with a Local Realtor During a Short Sale

In the current real estate market, the purchase of a home by a short sale transaction can make a lot of sense. Buying the home at a less inflated price can save you money. If you really want to succeed, you might want to consider working with a Realtor when completing a short sale in NC.

If you were not going to work with a Realtor, what other options would you have? You may or may not get lucky enough to find a home owner smart enough to negotiate such a deal on their home, but they will NOT be looking out for your best interests. It is not necessarily going to be an easy task. At best, you will still need some legal representation.

You might also end up talking to a real estate investment company or specialist. In this case, you may be working with someone who has the expertise to negotiate with your lending company, and guide the transaction through to closing. You gain some legal and technical expertise here, but there is a catch. The real estate investor is not required to be licensed, and therefore does not have to abide by the same code of ethics as a Realtor. These folks are strictly in the deal to turn a quick profit. They can have a buyer waiting for your house, as the property is closed. The REI route has also become quite the “get rich scheme.” There are lots of people that teach the basic concepts of real estate investment to anyone.  Chances are, you may end up working with someone with little to no experience negotiating a short sale transaction.

The final thing to consider is that, most of the time, banks like working with Realtors for short sale NC transactions. They realize the Realtor will be paid a fairly consistent commission for their work, versus the type of profits that real estate investors can often turn. If they know they are working with someone licensed, with a good reputation in the local community, you will often get a better deal from the bank.  Working with a Realtor during short sale can make the transaction a win-win for you and your lending institution.

February 12, 2010

Citi’s Foreclosure Alternative Allows Homeowners to Stay for Six Months

As one of the nation’s largest mortgage servicers, CitiMortgage is still contending with a deluge of foreclosures that just doesn’t seem to be abating, despitestepped up mitigation efforts and government relief programs. On Thursday, the company announced a new pilot initiative that will allow distressed CitiMortgage borrowers to avoid foreclosure and remain in their homes for six months if they agree to sign over their property deeds to the lender.

In addition, Citi will provide relocation assistance to help borrowers transition to another residence at the end of the program. This expanded deed-in-lieu-of-foreclosure program is being piloted in Texas, Florida, Illinois, Michigan, New Jersey, and Ohio, beginning February 12.

“At CitiMortgage, we’re committed to finding every solution possible to help families facing foreclosure. However, the reality is that not every homeowner has the financial ability to remain in their home,” said Sanjiv Das, CEO of CitiMortgage. “The goal of the program is to help homeowners make a smooth transition into the next chapter of their lives.”

In exchange for the deed on their property, CitiMortgage will allow borrowers to stay in their homes for up to six months without making mortgage payments under its new Foreclosure Alternatives Program. At the conclusion of the grace period, the company will provide a minimum of $1,000 to help the borrower move. Citi will also provide

relocation counseling by trained professionals and will cover certain monthly property expenses if the bank determines the borrower can no longer afford them.

Payment of utilities costs will be the responsibility of the borrower. Other costs incurred by the borrower, such as homeowner’s association and escrow fees, will be determined on a case-by-case basis considering the borrower’s specific financial circumstances, the company said. As part of the agreement, borrowers must maintain the property in its current condition and agree to bi-monthly meetings with Citi’s relocation professionals.

According to CNN, Citi will also forgive any difference between the value of the home at time of repossession and what the borrower owes – once the deed goes back to the lender, the borrowers walk away free and clear.

Citi explained that before a borrower enters the Foreclosure Alternatives Program, they must first be evaluated for a permanent mortgage modification. For those who do not qualify for a modification or another solution, CitiMortgage says it will explore the possibility of a short sale, and if that’s not feasible, then the borrower may be considered for the deed-in-lieu program.

In order to be eligible, homeowners must hold first mortgages with a clear title owned by CitiMortgage, occupy the property, and be at least 90 days delinquent on their mortgage payments.

As it evaluates the progress of the pilot program, CitiMortgage said it will assess whether or not to expand the program to other parts of the United States. The initial pilot is expected to help as many as 1,000 families.

While CitiMortgage has done deeds-in-lieu and short sales in the past, the company says it is increasingly looking to them as alternatives to foreclosures.

“We hope others in our industry will join us in helping distressed borrowers across the country,” said Das.

Das told CNN that he knows of no other big servicer with a program like Citi is implementing. “This is a deed in lieu on steroids,” he said.

February 8, 2010

Administration Updates Documentation Collection Process and Releases Guidance to Expedite Permanent Modifications

WASHINGTON – As part of the Administration’s ongoing housing market stabilization plan, the U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) today released updated guidance for servicers participating in the Administration’s mortgage modification program. This guidance refines the documentation requirements in order to expedite conversions of current trial modifications to permanent ones.

“With more than 850,000 homeowners in trial and permanent modifications, we are providing immediate relief to struggling homeowners,” said Phyllis Caldwell, Chief of Treasury’s Homeownership Preservation Office. “Today’s guidance represents our commitment to more efficiently move qualified homeowners into permanent modifications.”

“Increasing the number of borrowers receiving permanent modifications under HAMP is critical to our efforts to preserve affordable and sustainable homeownership,” said HUD Senior Advisor for Housing Finance William Apgar. “While we continue to meet our goals to provide immediate assistance, the updates announced today should enable servicers to transition borrowers more quickly and easily from trial to permanent modification.”

On December 23, 2009, the Administration required most trial modifications to be placed in a temporary review period to ensure that all borrowers are being fairly evaluated for the program. During this temporary review period, servicers were not permitted to cancel an active HAMP trial modification for any reason other than failure to meet the HAMP property eligibility requirements. This allowed servicers to convert a significant number of trial modifications to permanent ones. In fact, the total number of conversions more than doubled in December. Guidance released today will help improve this conversion process for the future.

The updated process requires that key documents, including proof of income, be obtained from the borrower before a borrower evaluation can begin. This more robust requirement of upfront documentation will make it easier and quicker to convert trial modifications to permanent modifications and enable servicers to use their resources more effectively.

Guidance Details

Supplemental Directive 10-01 provides guidance on two major issues:

1) New Requirements that Documentation be Provided Before Trial Modification Begins

Today’s guidance refines the documentation process and makes it easier for eligible borrowers in trial modifications to get permanent modifications quickly. Under this guidance:

A simple, standard package of documents will be required prior to the servicer’s evaluation of the borrower for a trial modification. This process will be required for all new HAMP modifications that became effective after June 1, although mortgage servicers may implement it sooner.

2) Converting Borrowers in the Temporary Review Period to Permanent Modifications

In December, Treasury implemented a review period through January 31 to provide servicers additional time to collect and submit missing documentation for borrowers in trial modifications, to require that borrowers be notified of any missing documents, and to give borrowers an opportunity to dispute and correct any erroneous information in their applications. Today’s guidance clarifies for servicers the proper procedures for conversion of those borrowers who are current on their monthly payments to permanent modifications.

Background

The Home Affordable Modification Program aims to help responsible American homeowners maintain a sustainable monthly mortgage payment through a pay-for-success framework that aligns incentives of borrowers, lenders and servicers. Over 900,000 Americans have begun trial modifications since the program’s inception and over 110,000 have been approved for permanent modifications as of December 31, 2009. The median monthly savings for individual homeowners is more than $500 per month. Over 100 servicers have signed up to participate in HAMP, covering more than 89% of mortgage debt outstanding in the country.

January 28, 2010

Supplemental Directive 10-01 is available at https://www.hmpadmin.com/portal/docs/hamp_servicer/sd1001.pdf