Short Sales- HAFA explained- this is the third part in our series on analyzing the HAFA guidelines. 

Today I started getting links and calls from Real estate agents around the county and even two agents from Miami. They all were saying, this is great. Did you read the Sunsentinal today? They say that short sales are only going to take ten days now! Yeah! Right! What planet did they just fall off of to believe that is even remotely possible. Oh, but this is what the government is forcing the banks to do. Yeah! Right! Again! NOT! 

This ten day approval time is being taken out of context. I am sure that many in the media are quoting this statement without preface to get readership and get folks excited and then read their paper more. I left a comment- Did you read the 43 pages of the HAFA guidelines?

Why are you giving false hope to homeowners who are in a short sale situation or will need to go into the short sale situation soon? 

Please read the series I am writing in regards to HAFA. 

Here is the first post: The Truth about HAFA Part I

Here is the second post: Defining HAFA Part II

Know Your Facts About HAFA Before You Blog it. 

In this post I want to clear up the rumor that lenders are going to have to approve short sales within ten days. This needs to have a qualifying statement. 

The ten day time frame is AFTER a lot of other things have transpired up to that point. 

On page 8 of the HAFA Guidelines it states: 

'Approval or Disapproval of Sale- Within ten business days of receipt of the RASS and all the required attachments, the servicer must indicate its approval or disapproval of the proposed sale by signing the appropriate section of the RASS and mailing it to the borrower." 

So this does not mean that from the time of the offer to the time of the acceptance or rejection has to be ten days. It means from the point in time that everything is done on the file, the package is in, the BPO is done, the borrower is qualified for the HAFA program, the offer is turned in and the HUD meets the net the servicer is looking for. 

That is obviously not a ten day closing or a ten day short sale. Let's just use some common sense. If you ever have done a short sale with Bank of America you know that most of the time it takes months to do a short sale. There is no way they can implement a system in which you go from start to finish in ten days. Remember, the investor still has to approve most files. Just ordering, receiving and analyzing a rush BPO takes a week. 

When something sounds too good to be true, it probably is. 

The next part of the problem is that these guidelines are for non GSEs. Freddie mac and Fannie mae are not going to use these guidelines. They are special (or so they think they are) and will come up with their own guidelines. The problem with that is 8 out of every ten short sales we do- are GSE mortgage backed securities. Those short sales don't qualify for the HAFA program. That is over 60% of all the mortgages in this country. 

In order to be considered for the HAFA program: 

 

• The home must be the principle residence of the homeowner.
• The first mortgage must have taken out on or before January 1, 2009. 
• The mortgage is delinquent of will be in the foreseeable future- showing impending delinquency. 
• The unpaid balance owed on the first mortgage can not be more than $729,750. 
• The monthly mortgage payment has to be more than 31 percent of the homeowner's gross income. 

 

While it remains to be seen if these new HAFA guidelines will create any shortening of the time that it takes to get short sales from contract to closing it is more important for agents to understand the short sale process itself. 

Also, if you do not qualify for this HAFA program- you may still be able to do a short sale. We will just go through different channels. 

Agents need to get educated in short sales if they are to do them. This is a great niche for those agents who have tough skin and are patient and understanding. If you are good with your communication skills and shine with your negotiation skills; then short sales may just become your best niche ever. 

 

   

 

To  view Florida Short Sales- Click here. We know Palm Beach County Short Sales and Port St Lucie Florida Short Sales and will help you get your home Sold if you need to Sell your home and help you buy your home in Palm Beach County Florida: Call us today.

 

   

 

 

        

 

Copyright © 2010 By Katerina Gasset, All Rights Reserved.*Short Sales- HAFA Guidelines and The TEN Day Dream Short Sale* 

 

 

 

 

 

 

 

Recently I listened to an interview with a loan officer from New York who has spent most of his career researching and analyzing countless credit reports and credit scoring information in an attempt to understand how credit scores are calculated and the nuances surrounding this oftentimes baffling formula. The following are some of the credit scoring myths that were discussed. You will be surprised by some of them and hopefully they will provide you with the means to help improve your score!

Myth: there is a specific number "score" that is attached to my credit file.

Fact: your credit score is not stagnant. It is created the moment your score is pulled. It may vary from month to month.

Myth: pulling my own credit report might hurt my score.

Fact: pulling your own credit does not affect your score if done on various sites such as www.annualcreditreport.com or www.myfico.com. This is what is called a "soft inquiry."  It's never a bad idea to pull and examine your own report and look for inaccuracies. Your score may only be affected if your credit is pulled by a mortgage company, auto dealer, department store, etc. This is called a "hard inquiry" and you want to keep these to a minimum. However, be aware that there is what's called a "14 Day Rule" with the credit bureaus which means that you can shop around for a mortgage or car and have as many of those types of creditors pull your credit within a 14 day period and it will only count as 1 hard inquiry, not 10 or 12 which is good news! My advice however, is to do all this within a 13 day period just to be on the safe side...

Myth: closing out my paid off credit cards will help my credit score

Fact: closing credit card accounts is never a good option if you're trying to raise your credit score. Although it sounds counter-intuitive, it is always better to have more unused, available credit especially if you're carrying a balance on your other cards. Part of your score is based upon your ratio of credit used to credit available. The more you have available, the better. It's just that simple.

Myth: once I pay off a collection, it will no longer show up on my credit report

Fact: anything on your credit report stays on there for a minimum of seven years. The only thing that will change if you pay off a collection is the balance to zero and the status to "paid" or "settled."

Myth: paying off old collection accounts will help my credit score.

Fact: morally this sounds like the right thing to do. But the truth is if you have open collection accounts that are over two years old it is best to leave them alone. The reason for this is because the collection's "last active" date on the credit report affects the score by how recent the account was active. The more recently active collections will have a greater negative impact on your score. If you pay off a collection that has been dormant for 3 years, you've now "brought it back to life." And even though it is now paid, you've actually hurt your score by making an old collection new again. If your lender requires they be paid off as a condition of the loan approval, then you may do it through closing but not any sooner. Now, if you've negotiated with the collection agency to delete the account upon full payment, then by all means, pay it off. Deletion of the account will more than likely increase your score. Alternatively, if the collection account is less than two years old and you can't negotiate a PFD, then paying it off may help your score.

Myth: if I co-sign on a credit account for a friend or family member, their payment history will not show up on my credit and/or affect my score.

Fact: in a perfect world, you would have been thoroughly informed befor you co-signed for anyone. The fact is, if you co-sign for any credit account, you are just as responsible for timely payment on that debt as the main signor/borrower. That credit account will most certainly show up on your credit and if the main signor has not been making timely payments, this will undoubtedly lower your score. Please be careful and consider the consequences when co-signing on a loan!

Myth: I make way more than the minimum monthly payment on all my credit cards so my score should be higher than someone who only makes the minimum monthly payments.

Fact: there are only two types of ratings the credit companies send the credit bureaus: "paid as agreed" or "not paid as agreed" (and of course if "not paid as agreed" they would tell the bureaus how many times you've been 30,60,90 or 120+ days late). If you've "paid as agreed" they do not care by how much - only that you've paid what you agreed to pay which is the minimum monthly payment. Whether you make the minimum monthly payment or $500 more per month it makes no difference in your credit rating. Of course, paying "as agreed" is the best you can do so by all means keep doing it. If you are really interested in improving your score, be diligent in paying down your various balances as much as you can and don't charge them back up every month. As stated above, the greater your available credit, the better your score.

Myth: late payments is the biggest drain on my credit score

Fact: sure late payments really do hurt your score, especially if they're within the last 12 months. However, how much credit card balance you carry in relation to your credit limits is also a huge factor. In fact, the worst thing you can do to your score is max out all you credit cards. As stated above, the best thing you can do to help your credit score is make a plan to pay down your card balances starting with the cards with the balances that are at their credit limit.

Myth: never file for bankruptcy. It's the single worst thing you can do to your credit rating.

Fact: this is a touchy subject and I would never overtly advise someone to file for bankruptcy. It is always best to talk to a qualified attorney if you are in such dire straits. But the reality of it is, if you are even considering filing bankruptcy chances are your credit is pretty wrecked anyway and you have no prospects of improving it. Filing bankruptcy may be the only way for you to climb out of the situation and work on educating yourself in rebuilding your credit and forming a good solid financial plan for your future to ensure it does not happen again.

I hope these examples arm you with more information you can use when considering buying a home. The more you know about your credit and how your credit scores are affected, the more you can help yourself and your lender optimize those scores and thereby open up more varied and attractive financing options to you. If you have any questions, please do not hesitate to call me. I've helped many people with their credit and I can help you too.

This content was created by Cari Anderson and originally posted on our "Mortgage Notes" blog.

~Cari & Doug Anderson with Diversified Mortgage Group

Cari CA DRE #01220718

Doug CA DRE #01165309

This will be the first of many public blogs to come. The story will be 1,000 ways to pick the right Realtor. This is pretty simple. Number 1,000 comes with an added bonus, but you'll have to stick around to find out what it is. Here we go.

 

1. If a Realtor starts out by showing you a picture of themself in any magazine, walk away. Most Realtors will pay top dollar "to have their names in the lights." They love to impress themselves and most importantly, other Realtors. They assume this type of advertising provides them instant credibility with you, the consumer. Ego advertising is for the ego, nothing more.

2. Don't assume an "OLDER" Realtor is one that is wise about selling homes. Most agents I know get into real estate after finishing a career in something entirely different. It's a popular "second" career and even hobby for many folks. Again, just because she's 60 doesn't mean she's more experienced than me.

3. Many new agents and even experienced agents feel it necessary to buy a car they can't afford. Don't assume A LOT when you work with a Realtor. Instead, ask dozens and dozens of questions. If a Realtor drives a 65k BMW, but wears stretchy polyester pants from Sears than you have to wonder if the agent is just pretending to be successful.

4. Do try to annoy your Realtor with questions when your first meet them. You'll figure out there temperament level quickly. Many agents boast about their ability to "provide excellent customer service." For fun, repeat yourself a few times to see if they start getting pissy. I love when prospects DRILL me. I love it because I know other agents won't be as patient.

5. If your Realtor starts the conversation out with.. "I'll reimburse you part of the commission or I'll list your home for almost nothing" then you need to hide from them. Odds are they sleep in that expensive BMW at night. They probably are starving financially and are reduced to trying to BUY their buyers and sellers. You do get what you pay for in this business.

6. If a Realtor agrees with all that you say, find a new one. Your shadow is more competent than a yes man.

7. Don't assume a Broker has more negotiating skills than a Salesperson. A salesperson is a regular Realtor without a Brokers license. Brokers usually market the office, recruit new agents and are very busy doing "other things" besides selling real estate. This isn't to suggest that all Brokers are out of touch when it comes to working with buyers and sellers on a day to day basis.

8. Don't pick the Realtor your boss suggests, especially if it's his spouse.  If "that" Realtor sucks, you're going to really be in a jam. Instead, say thank you, but no thank you. Your boss will respect your candor, not look down on you for choosing elsewhere. If you're working with a relocation department then it may be a different story.

9. Many agents have a website. Ask for it. The website can say an awful lot about that individual. 

 

See you next week.

 

 

Clearly, many if not most short sales involve a loan presently in default. As well, many times a short sale might involve a current borrower who can currently afford the payment. In several other situations, a seller may be “just hanging on” and the smallest thing could put them irreparably behind on their loan. Welcome to “eminent danger of default.”

In a hardship letter for a short sale (also known as short payoff), if a borrower/seller is currently not in default but can justifiably make the case that it is nearly unavoidable despite their willingness if circumstances were otherwise, they can proceed to conduct a short payoff/short sale (pursuant to Freddie Mac’s Single-Family Seller/Servicer Guide, Volume 2 Chs. 64-69: Servicing Nonperforming Mortgages Chapter B65: Workout Options B65.37: Eligibility requirements (08/20/09) – this can be viewed by going to http://www.freddiemac.com/singlefamily/ and searching the AllRegs link).  I'm referencing Freddie here buy the GSE's (or government owned entities) typically dance to the same tune.

Specifically, to be eligible, Freddie requires that the borrower:

1. Be experiencing or have experienced an involuntary inability to pay, unless the Mortgage is secured by a Manufactured Home and the Borrower has a buyer for the property

2. Be delinquent in his or her payments, or in imminent danger of default

3. Complete Form 1126, Borrower Financial Information

4. Be cooperative and allow access to the interior of the property for a BPO

5. Have had the property listed by a real estate broker at a price based on a market sales comparison using the as-is value with a 90-day marketing timeframe

6. Make the maximum possible contribution toward any deficiency from the sale in cash and/or a promissory note (though this will largely be governed by HAFA after April 5, 2010)

7. Not have entered into a program or arrangement where a third party takes title to the property and arranges a short payoff in exchange for a fee

8. Waive reimbursement of any Escrow, buydown funds or prepaid items and assign any insurance proceeds to us, if applicable

Interestingly, Freddie Mac maintains the requirement to be late for loan modification purposes. It doesn’t matter if default is eminent in this situation. To modify they have to have current income, be late on their payments and have to not be eligible for the Freddie Mac Relief Refinance (in that unlikely event that they qualified and were late on their mortgage).

It would therefore be wise to take a considerable amount of time in crafting the hardship letter appropriately to define the case for eminent default if such a situation exists (wise in any case but especially where the loan is current). Loan servicers will be evaluating income to be sure that the mortgage payment, expressed as a percentage of the gross income, is meaningfully in excess of 31% or they’ll be looking for significant life changes such as the loss of a job or something of that nature. If such situations exist, according to Freddie Mac’s instructions to its loan servicers, a borrower may proceed to a short payoff without being currently in default.

In my introductory Post to the New Good Faith Estimate 2010 Form, I left out a three important things that the New Good Faith Estimate 2010 Form does not include, they are:

• It includes the Principle & Interest, PMI, or FHA MI in the monthly payment, but it does not include the Taxes, and Homeowners Insurance in the monthly payment.
• It does not state the Loan Program being applied for.
• Even though the New Good Faith Estimate 2010 Form shows the total Costs, it does not give an estimate of how much money the Borrower is expected to bring to Closing.  Example of this is that Seller Paid Contributions are not included on this form, so they are not reduced from the Total Costs.

Today what I want to do is to list the three categories of costs that may or may not change once the New Good Faith Estimate 2010 is issued.  These three categories are costs that Cannot Change, cost that Can Change by 10%, and costs that can Change at Settlement.

• Costs That Cannot Change (0% tolerance):
  • Origination Charges.
    
  • Credit or charge (pints) for the specific interest rate chosen (after the rate is locked) 
    
  • Adjusted Origination Charge (after the rate is locked)
    
  • Transfer Taxes.  

• Costs That Can Change By 10%:
  • Required Services that the Lender Selects.
  • Tile Services or Lender's Title Insurance (if the Lender selects them or identifies the companies)
  • Owner's Title Insurance (if the borrower uses the companies the Lender identifies)
  • Required Services that the Borrower can shop for (if the borrower uses the companies the Lender identifies)
  • Government recording charges

• Costs That Can Change At Settlement.
  • Required Services that the Borrower can shop for (if the borrower does not use companies identified by the Lender.
  • Title Services and Lender's Title Insurance  (if the borrower does not use companies identified by the Lender.
  • Owner's Title Insurance (if the borrower does not use companies identified by the Lender.
  • Initial Deposit for Borrower's Escrow Account.Daily Interest Charges
  • Homeowner's Insurance.

My next Post will further explain some of these charges.

 

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com