The first loan was approved by the lender, and in this approval the seller is receiving $3000 towards relocation costs when the sale is finalized; in California we say when it closes escrow. So, I then proceed to get approval of this sale from both 2nd and third lien holders.

Unfortunately both 1st  land 2nd liens or lenders have to approve and agree on the terms and the dollar amounts. In this case, the credit union is not allowing the seller to receive any funds at all. If they do not agree, this property will go to foreclosure, and the second loan will receive NO MONEY at all. Neither will the HOA.

I take my work very seriously and I am very honest with all involved – my seller, the buyer, other agents, all lenders. We need to prevent another property from becoming distressed, run down condition, vandalized.  By offering the sellers financial aid in selling, they are maintaining the homes until the buyer takes possession. This particular home is being very well maintained by the seller and due to the regulations or rules of this credit union, it will go to foreclosure.

I think that is a pity.

Again, that is just MY opinion! What do you think?

More specifically, I have been reading and participating in the blog entitled “Bank of America Short Sales”. I found this web site quite by accident. One day I decided to google “Bank of America” help……

Google found many articles for me and this is the best one yet. Basically, anyone with a question can post their issue and any other broker can log in and post a reply. It has given me valuable phone numbers to the office of

the President of Bank of America and more. It has helped me in working on my own short sale assignments  / listings. If you are a home owner and are aware of the difficulties your agent / broker may be facing, just

have her/him go to this site. There is lots of help there. Agents from across the country are more than willing to help each other. Good luck!

 It is called The Home Affordable Foreclosure Alternatives program which  will provide certain incentives to lenders, and to home owners who chose to do a short sale, rather than wait until the bank takes the property.

 The program is part of the Home Affordable Modification Program, or HAMP which was implemented in February 2009 to modify homeowners’ loans to avoid foreclosure. Both programs are funded through $50 billion from the bank bailout. The government wanted to basically create a streamlined process as an alternative to the foreclosures going on right now.

 Due to the high volume of offers made on short sales, banks can take months to respond. Discouraged buyers will often back out  of or cancel  the offer.

 Timelines have been put into place through the new program in order to speed up the short sale process.

 The short sale transaction must be completed within 120 days. The time can be extended up to 12 months if necessary.

 Short sales take up to six to nine months to get approved. It’s getting reduced to 10 days, so a bank will have to give a response to a buyer’s offer within 10 days.

 It may not be an approval, it may be a rejection or it may be a counter offer, but there will be an answer.  Through HAFA, lenders will be required to give the homeowner preapproved short sale terms before going to market. This will include a listing price and an amount of sale proceeds the lender is will to accept.

 What this new program is doing is streamlining the process and allowing for all banks to have consistent forms and a consistent number of items that can be requested.

With a short sale, a buyer will make an offer and the lender will have to review it and respond
Banks are not required to participate, but most banks will likely participate.

 Homeowners can receive up to $3,000 to pay for moving costs after the sale is completed. It’s the government’s way of offering a little bit of help, to pay for rent of a U-Haul truck,  or help with first month’s rent payments.

 In addition, the servicer, which the organization responsible for collecting monthly loan payments, will receive up to $1,500 per short sale to cover administrative fees.

The program only applies to homeowners with one mortgage.

Many people in Southern California took out second mortgages on their homes either because they needed the money or wanted to make large purchases .

 The program will not be automatic. Homeowners have to call their lender to request a short sale through HAFA.

Why Short Sale?

 Entering into a short sale agreement provides more benefits to homeowners than foreclosure, on which the HAFA program is attempting to capitalize.

Many borrowers want to know:

  “How does this impact their credit good and bad? They want to know will this satisfy my lender for any further action against them. They want to know what are the tax ramifications surrounding short sales and foreclosure. And they want to know, believe it or not, this is very important, they want to know `when will I be able to buy again?’ ”

Upon the closing of a short sale through the HAFA program, the homeowner will be released from all liability for the debt of the first mortgage.

 However that does not necessarily protect them from the tax ramifications, Sorensen said.

The benefits of HAFA is that it requires the lender to disclose this fact that by cooperating in pre-foreclosure or a short sale may have tax implications.

 Through HAFA lenders are required to divulge all information relating to tax consequences and credit score impact to the homeowners considering a short sale.

It is now being required that lenders disclose that there are serious tax implications when one cooperates in a short sale or losing their home to foreclosure. That now must be disclosed in writing for the first time ever. It will also affect the borrower’s FICO score. However, a short sale will not lower the FICO score as much as a foreclosure will.

 The homeowner will take a hit to their credit score, but not as much as with a foreclosure, Starks said.

The HAFA program is expected to alleviate the burden of foreclosures on homeowners hoping to enter a regular home sale.

It puts homeowners back into the community generating taxes again instead of another boarded up house. Every house that’s boarded up and foreclosed upon drops other home values up to $9,000 for each foreclosure.

On average, a bank will lose up to 40 percent on a foreclosed loan, but up to 19 percent on a short sale.

As of April 5, 2010, the government is doubling the incentives for banks to cooperate in short sales; they are now going to receive $3000 to bank participants on the first loan, and up to $6000 on the second loan.

They are also going to double the incentive to borrowers / sellers participating in short sales to assist in relocating.

* NOT every Short Sale will be a HAFA Guidelines Short Sale. Remember, these are guidelines not laws.

* A borrower does NOT have to go through the HAMP Loan Mod process to qualify for a HAFA Short Sale. In other words, they can simply request a Short Sale (or Deed in lieu of foreclosure) which means giving the house back to the bank.

* Virtually ever lender is participating.

* There will be standardized, uniform forms.

* Lender will tell the real estate broker/ agent the NET dollar amount they need upfront.

* Borrowers MUST list with an agent. No For Sale By Owner doing a HAFA short sale.

* Lenders have 10 days to approve/ accept or request and extension to all offers.
* If the lender (servicer) doesn’t accept your Short Sale offer they have to tell you IN WRITING why.

* Fannie and Freddie HAFA Guidelines are coming soon.

 SHORT SALE: A homeowner can enter into a short sale when they owe more on their mortgage than the home is currently worth.

In a short sale, the servicer allows the homeowner to list and sell the mortgaged property with the understanding that the net proceeds from the sale may be less than the total amount due on the first mortgage.

DEED-IN-LIEU OF FORECLOSURE: With a deed-in-lieu, the borrower voluntarily transfers ownership of the property to the servicer.

SERVICER: A mortgage servicer is responsible for collecting monthly loan payments as well as escrow accounts.

DELINQUENT: A homeowner is delinquent on their loan when they fail to make payments.

DEFAULT: A homeowner can default when they are unable to pay their debt.

FORECLOSURE: A foreclosure occurs when the homeowner’s right to the property is terminated. A home can be foreclosed upon when the homeowner defaults on their mortgage payments.

Paperwork / Rules for Offer Submission: A standard purchase and sale agreement is used along with an addendum acknowledging the fact that this is a short-sale transaction.

The asking price can be whatever the homeowner chooses since they still own the property. The seller might be pricing it low to encourage multiple offers, might have it high to try to recoup as much money as possible or it might be priced correctly. In most cases the lender has not approved a sale at the list price so a Buyer doesn’t know if his offer even at list price will be accepted. The buyer should perform their own market analysis and make an offer close to that. Submission of the market analysis to the listing broker at the time of offer may also be a good idea.

While it might be nice to have repairs made, the seller certainly doesn’t have the resources to make them and the lender is very unlikely to do so since they don’t own the property. So an “as-is” sale is the best and most likely to be successful. This makes trying to buy a short-sale property that needs repairs using conventional or FHA financing challenging at best and an exercise in futility at worst. This also contributes to the low success rate of completing a short-sale transaction.

Buyer should give a check to escrow after the offer is accepted. A Buyer can be flexible with this unlike a Bank REO situation. The Buyer should also supply proof of funds for down payment and pre-approval from the lender for any new loan to make your offer stronger.

 Closing can occur within 30 days but the 30 day clock will not start until the lender gives their approval – see below.

What is the time frame in this scenario? Initially this type of offer is handled like it would in a non-short-sale situation. The listing broker will present it to the seller but once they approve it, it will be forwarded on to the lender for their approval. At that point the listing broker has no control over the process and is in a wait and see mode like the Buyer.

This approval process may take one week or it may take up to three months. One thing to keep in mind is that while all parties are waiting for an approval of the offer another department of the lender/bank is working on the foreclosure and may actually foreclose on the property with offers in for approval.

If that happens, the deal is dead and the listing terminated as the former seller is no longer the owner of the property and does not have authority to sell. If that happens and the Buyer is still interested in purchasing the property work with your broker to follow-up on the property as it will come back to market with a different listing broker and usually a different listing price.

In addition to brokers, a short-sale negotiator may be involved who attempts to negotiate with lenders on behalf of the buyer and seller. By having experience working with lenders the hope is that they will be more successful than the inexperienced seller going it alone. It has proven to be somewhat effective but there is also a fee involved. It is a contingent fee that typically runs in the $2,000-$5,000 range and it is expected that the buyer pays this fee if they are successful. If the seller is using a negotiator it should be disclosed in the listing description so if you don’t see it, ask the question to avoid a surprise down the road. You really need patience.