Charlotte Short Sale Advisors

 Bailout watchdogs on Wednesday raised a red flag over the Obama administration’s program for helping homeowners avoid foreclosure, saying the multibillion-dollar fund is not working and the Treasury Department refuses to fix it. 

Warning that the inefficiencies could hold the economy back, the officials told a Senate panel that changes should be made and that Treasury needs to come clean. One official called the program “one of the greatest failures in transparency and accountability” in the $700 billion bailout. 

A $50 billion fund was carved out of the Wall Street bailout for the mortgage program. The housing market being a root cause of the 2008 economic crisis, the money was pitched as a way to help millions of homeowners avoid foreclosure and get the economy back on track. 

But a fraction of that money, $248 million, has been spent. 

Elizabeth Warren, chairwoman of the congressional TARP Oversight Panel, said that for every one family that wins a permanent mortgage modification, “10 more have been moved out through foreclosure.” 

“This is a program that’s just — it’s behind the curve,” she told the panel on Wednesday. 

Special inspector general for the financial bailouts Neil Barofsky said the program has not “put an appreciable dent in foreclosure filings” during the Senate Finance Committee hearing on the $700 billion bank bailout. He also said the Treasury Department has ignored earlier demands that it set clearer goals for the program.  A Treasury official said Wednesday that the bailout program has had “a major effect on the ability of people to stay in their homes.” The official argued that before the program was launched, it was not designed to prevent all foreclosures and not designed to help investors or speculators — or those with vacation homes or million-dollar homes.

More foreclosures could force down home prices and further hurt the ailing housing industry. 

Part of the problem with the Home Affordable Modification Program has been that plenty of homeowners are being accepted into a trial period, but relatively few are having their loan changes made permanent. Warren said just 165,000 have moved into permanent modifications with help from the TARP program, though more than that have advanced through a similar program administered by Fannie Mae and Freddie Mac. 

Barofsky said Treasury is giving mortgage companies too much leeway to decide which homeowners will qualify for a program to reduce the principal balance of their mortgages. 

The program relies on voluntary cooperation from mortgage companies, Warren said. She said many of the mortgage debt collectors make more money when they foreclose than they do when helping homeowners. 

“We can’t have a program in which, in effect, we put incentives on the table paid for by the taxpayers to say, ‘Please do the right thing here,’” she said. “We have a crisis, and the consequences of not having cooperation from the servicers … (is) felt by this entire economy . We need a program with far more urgency and some real teeth in it.” 

Article contributed by Fox News

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″

In this difficult economic environment, many Charlotte homeowners find themselves underwater on their mortgage.  Many homeowners have heard about a short sale, and ask if this is a better option than a foreclosure.

The simple answer is Yes.  A short sale is a much better option for a homeowner than  a foreclosure. Here’s why:

1) Credit:  If your house goes into foreclosure, this could negatively impact your credit for up to 10 years.  A short sale on the other hand is less severe.  A short sale may only impact your credit for up to 2 years.  If you short sale your home and maintain your financial worthiness, then you can re-establish good credit in a shorter amount of time.

2) Another consideration is how long you need to stay in your home.  If your house if foreclosed upon, then you will be forcibly removed by local law enforcement.  Yet, with a short sale, you can remain in the house during the sale negotiations.  Clearly a short sale is a much more practical option.

3) There are additional financial considerations of a short sale versus foreclosure.  In a foreclosure scenario, you will get a deficiency judgment for the entire amount you owe.  This amount will need to be declared on both federal and state taxes.  If your lender agrees to a short sale, you might have to pay income tax on any resulting deficiency.  But there are some exceptions that will allow you to avoid paying this tax.  According to the Mortgage Forgiveness Debt Relief Act, you may qualify for an exemption if the loan was secured by your primary residence.  Under this act, you can exclude up to $2 million in forgiven debt.  In this scenario, you do not have to pay income tax on the deficiency.

It is best to get the most amount of money for your property in a short sale to cover any deficiency judgments.  One way to do this is to work with an experienced real estate professional who can get you multiple offers on your property.

Now is a great time to consider a short sale if you are a homeowner.  The Home Affordable Foreclosure Alternatives Program (HAFA) aims to make short sales easier for homeowners and the banks involved in structuring the loans.  Not only will HAFA make it easier to complete a short sale, but borrowers can get a $3,000 “relocation incentive” and servicers (ie- banks) will get $1,500 for handling a short sale.  This program will go into effect on April 5^th, so if you are a Charlotte homeowner behind in your mortgage, this could be a great time to consider a Charlotte short sale.

Disclaimer:  For all financial issues or concerns, it is advisable to consult with a tax attorney and/or CPA.  Content in this article is not tax advice, and is only a representation of possible outcomes during a short sale or foreclosure situation.

For the full details coming up in April, click here.