You know HAFA, right? That’s the government’s short sale program that allows for a $3000 short sale incentive to sellers and whereby the banks agree to waive deficiency for all participants in the program.
While many folks moan and groan about HAFA processing times at many of the major lending institutions, there seem to be even more moans and groans based on general misunderstandings of the program itself (Disclaimer: The previous sentence is simply my opinion based on the countless conversations that I have with agents about their short sale drama. I have absolutely no statistics to back this up).
Top three myths:
Here are the top three sources of confusion that are often associated with the HAFA program:
- My seller’s lender is on the list of HAFA participants, but the rep at the bank told me that they do not participate in HAFA. I know that she is lying. What can I do?While it is not uncommon to call a lien holder multiple times and get different instructions and information each and every time that you call, it is possible that a short sale will not qualify for HAFA even if the bank is on the list of participants. Here’s why: Banks, such as Bank of America or Wells Fargo, service loans for multiple investors. It is the investor that determines participation in the program. So it is possible an investor who does not participate in the program owns the seller’s note.
- My seller’s second lien holder wants $15,000 to release the lien even though my seller qualifies for HAFA and I have HAFA short sale approval from the first lien holder.What this means is that the short sale can be closed, but not through the HAFA program. In the HAFA program, the second lien holder must agree to receive $6000 from the first lien holder and agree to waive the right to pursue deficiency.
- My second lien holder wants $9000 and my seller will use the $3000 cash incentive plus the $6000 from the first in order to complete the HAFA short sale. You cannot do that. In the HAFA short sale, the second may not receive anything more than the money allotted by the first lien holder. Also, if you use the incentive to pay any bills at closing, make sure you get the permission of the first lien holder.
As you can see, there are lots of subtle little problems that can come up during short sale negotiations in a HAFA short sale. If you are not sure about how to proceed, ask for help from your Broker or another agent you know who has lots of experience processing short sales. You’ll be glad you did!
Photo: flickr creative commons by taberandrew