Understanding the New Home Affordable Foreclosure Alternatives Program (HAFA)

February 15, 2010

On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA), which will help homeowners who are unable to retain their home under the Home Affordable Modification Program (HAMP). Under HAFA, a borrower (the current owner) may be able to avoid foreclosure by completing a short sale or a deed-in-lieu of foreclosure (DIL).

HAFA is designed to simplify and streamline the use of short sales and deeds-in-lieu of foreclosure by improving the process. Specifically, HAFA will:

• Complement HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
• Use borrower financial and hardship information already collected in connection with consideration of a loan modification under HAMP.
• Allow borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
• Prohibit the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6%).
• Require borrowers to be fully released from future liability for the first mortgage debt and if the subordinate lien holder receives an incentive under HAFA, that debt as well (no cash contribution, promissory note, or deficiency judgment is allowed).
• Use standard processes, documents, and timeframes/deadlines.
• Provide financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 match for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis; up to 3% of the unpaid principal balance of each subordinate loan).

HAFA is a complex program with 43 pages of guidelines and forms. To help everyone better understand the process, below are some frequently asked questions that address the basics. For more details on HAFA, visit www.realtor.org/shortsales for links to the guidance, many additional FAQs, and much more information about short sales.

What is HAFA?
Initially announced on May 14, 2009, with guidance and standard forms issued on November 30, 2009, the program will help owners (referred to below as borrowers) who are unable to retain their home under the Home Affordable Modification Program (HAMP). A borrower (the current owner) may be able to avoid a foreclosure by completing a short sale or a deed-in-lieu of foreclosure (DIL) under HAFA. The guidance and forms released on November 30 do not apply to loans owned or guaranteed by Fannie Mae or Freddie Mac. Those enterprises will issue their own HAFA guidance and forms.

Who is eligible for HAFA?
The borrower must meet the basic eligibility criteria for HAMP:
• Principal residence.
• First lien originated before 2009.
• Mortgage delinquent or default is reasonably foreseeable.
• Unpaid principal balance no more than $729,750 (higher limits for 2 to 4 unit dwellings).
• Borrower’s total monthly payment exceeds 31% of gross income.

How is the program being implemented?
Supplemental Directive 09-09 (November 30, 2009) gives servicers guidance for carrying out the program. All servicers participating in HAMP must also implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include such factors as the severity of the loss involved, local market conditions, the timing of pending foreclosure actions, and borrower motivation and cooperation.

A short sale agreement (SSA) will be sent by the servicer to the borrower after determining the borrower is interested in a short sale and the property qualifies. It informs the borrower how the program works and the conditions that apply. After the borrower contracts to sell the property, the borrower submits a “request for approval of short sale” (RASS) to the servicer within 3 business days for approval. If the borrower already has an executed sales contract and asks the servicer to approve it before an SSA is executed, the Alternative RASS is used instead. The Servicer must still consider the borrower for a loan modification.

What are the steps for evaluating a loan to see if it is a candidate for HAFA?
1. Borrower solicitation and response.
2. Assess expected recovery through foreclosure and disposition compared to a HAFA short sale or DIF.
3. Use of borrower financial information from HAMP. (May require updates or documentation.)
4. Property valuation.
5. Review of title.
6. Borrower notice if short sale or DIL not available (to borrowers that have expressed interest in HAFA).

What are the HAFA rules regarding real estate commissions?
The guidance states that a servicer may not require a reduction in the real estate commission below the amount stated in the SSA. The SSA states that the servicer will pay the commission as stated in the listing agreement, up to 6%. If the servicer has retained a vendor to assist the listing broker, the vendor must be paid a specified amount from the commission. Neither buyers not sellers may earn a commission in connection with the short sale, even if they are licensed real estate brokers or agents. They may not have any side deals to receive commission indirectly.

What else should I know?
• The deal must be “arms length.” Borrowers can’t list the property or sell it to a relative or anyone else with whom they have a close personal or business relationship.
• The amount of debt forgiven might be treated as income for tax purposes. Under a law expiring at the end of 2012, however, the tax may not apply. Forgiven debt will not be taxed if the amount of forgiven debt does not exceed the debt that was used to acquire, construct, or rehabilitate a principal residence. Check with a tax advisor.
• The servicer will report to the credit reporting agencies that the mortgage was settled for less than full payment. There will be a negative effect on credit scores.
• Buyers may not reconvey the property within 90 days after closing.

When does the program end?
Short Sale Agreements must be executed and returned to the servicer no later than December 31, 2012

Jeff Lischer is the Managing Director for Regulatory Policy, NAR. For more information, please visit www.realtor.org/shortsales.

Source: RISMedia

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Written by djumper · Filed Under Real Estate Blog 

U.S. Foreclosure Activity Decreases 10% in January 2010

February 15, 2010

RealtyTrac, one of the leading online marketplaces for foreclosure properties, released its January 2010 U.S. Foreclosure Market Report, which shows foreclosure filings—default notices, scheduled auctions and bank repossessions—were reported on 315,716 U.S. properties during the month, a decrease of nearly 10% from the previous month but still 15% above the level reported in January 2009. The report also shows one in every 409 U.S. housing units received a foreclosure filing in January.

REO activity nationwide was down 5% from the previous month but still up 31% from January 2009; default notices were down 12% from the previous month but still up 4% from January 2009; and scheduled foreclosure auctions were down 11% from the previous month but still up 15% from January 2009.

“January foreclosure numbers are exhibiting a pattern very similar to a year ago: a double-digit percentage jump in December foreclosure activity followed by a 10% drop in January,” said James J. Saccacio, chief executive officer of RealtyTrac “If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs or the new short sale and deed-in-lieu of foreclosure alternatives works.”

Nevada, Arizona, California, Florida post top state foreclosure rates
Despite a year-over-year decrease in foreclosure activity of nearly 18%, Nevada’s foreclosure rate remained highest among the states for the 37th straight month. One in every 95 Nevada housing units received a foreclosure filing during the month—more than four times the national average.

A 4% month-over-month increase in foreclosure activity boosted Arizona’s foreclosure rate to second highest among the states in January. One in every 129 Arizona housing units received a foreclosure filing during the month.

Foreclosure activity decreased by double-digit percentages from the previous month in both California and Florida, and the two states registered nearly identical foreclosure rates—one in every 187 housing units receiving a foreclosure filing. California’s foreclosure rate was statistically higher by a slim margin and ranked third highest among the states while Florida’s foreclosure rate ranked fourth highest.

With one in every 231 housing units receiving a foreclosure filing, Utah registered the nation’s fifth highest state foreclosure rate despite a nearly 12% month-over-month decrease in foreclosure activity.

Other states with foreclosure rates among the nation’s 10 highest were Idaho, Michigan, Illinois, Oregon and Georgia.

Six states account for nearly 60% of national total
California, Florida and Arizona posted the three highest state totals in terms of properties receiving foreclosure filings in January, and together those states accounted for more than 44% of the national total.
Illinois posted the nation’s fourth highest total in January, with 18,120 properties receiving a foreclosure filing during the month—a nearly 2% increase from the previous month and a 25% increase from January 2009.

Michigan posted the nation’s fifth highest total, with 17,574 properties receiving a foreclosure filing, and Texas posted the sixth highest total, with 12,225 properties receiving a foreclosure filing.

Other states with totals among the 10 highest in the country were Nevada (11,854), Georgia (11,274), Ohio (11,105) and New Jersey (6,146).

Phoenix only top 10 metro area to post monthly foreclosure increase
Phoenix foreclosure activity increased nearly 4% from the previous month, and one in every 102 Phoenix housing units received a foreclosure filing during the month—the second highest foreclosure rate among metropolitan areas with a population of at least 200,000. Phoenix was the only metro area among the top 10 to post a month-over-month increase in foreclosure activity.

Las Vegas documented the highest metro foreclosure rate, with one in every 82 housing units receiving a foreclosure filing, despite a nearly 2% decrease in foreclosure activity from the previous month and a nearly 21% decrease in foreclosure activity from January 2009.

Six California cities registered foreclosure rates among the top 10: Modesto at No. 3 (one in every 107 housing units); Stockton at No. 4 (one in 107); Riverside-San Bernardino-Ontario at No. 5 (one in 109); Merced at No. 6 (one in 109); Vallejo-Fairfield at No. 7 (one in 112); and Bakersfield at No. 8 (one in 118).

Two Florida cities rounded out the top 10: Cape Coral-Fort Myers at No. 9 (one in 121); and Orlando-Kissimmee at No. 10 (one in 143).

For more information, visit www.realtytrac.com.

Source: RISMedia

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Written by djumper · Filed Under Real Estate Blog 

Foreclosure Filings Fall for Fourth Month

December 14, 2009

Foreclosure filings fell 8% in November 2009 from October, the fourth straight month of declines, RealtyTrac of Irvine, Calif., recently reported.

With one filing for every 417 houses nationally, November saw the lowest amount of foreclosure activity since February. The numbers, while 18% higher than the same month last year, were a result of “loan modifications and other foreclosure prevention efforts,” said RealtyTrac chief executive James J. Saccacio. He said the recently extended and expanded homebuyer tax credit was keeping a lid on home value depreciation.

Saccacio warned, however, that a full recovery will come only “when unemployment recedes to normal, healthy levels and when availability of credit reaches a more rational balance between the extremes of the past few years.”

Data from Integrated Asset Services of Denver showed values continuing to decline despite the buying boom fostered by the tax credit.

Home values actually declined 0.05% nationally in October from September, with the Northeast, especially metropolitan Boston, dragging the numbers down. The Northeast region fell 1.6%; the Middle Atlantic, 0.06%.

“I have no doubt that the tax credit persuaded some buyers to make their purchase sooner than they otherwise would have,” said Dave McCarthy, president and CEO of Integrated Asset Services. “It’s reasonable to think the broader market will reflect that reality at some point down the road.”

Although Saccacio credited loan modification efforts as helping slow the rate of foreclosures, a recent Treasury report on the Obama administration’s Making Home Affordable program showed the effort coming up woefully short in getting lenders to alter mortgage terms permanently. Programs to mitigate foreclosures are not having the desired impact, said Michael Feder, president of Radar Logic in New York, which tracks the housing market.

Foreclosure1The Treasury Department reported that just 31,382 loans of the four million mortgages targeted had been modified permanently since the program began in February. There are 728,000 loans in “trial” modification. By some estimates, there is as much as $1 trillion in potential foreclosures already delinquent, Feder said. Lawmakers have been critical of the program, which they say is still focusing on the subprime-loan crisis of last year rather than mortgage foreclosures related to rising unemployment. They also have taken lenders to task, especially those who have taken government bailout money, known as TARP funds. Those lenders, however, have been reporting great success in modifying loans independent of the government program.

Resets of thousands of so-called exotic mortgages such as option adjustable-rate loans in 2010 “will undoubtedly lead to another wave of foreclosures as payments begin to double and triple,” said Sylvia Alayon, vice president of the Consumer Mortgage Audit Center in Fort Lauderdale, Fla.

“When principal balances go up and house values continue to plummet, refinancing will no longer be an option for homeowners in negative amortization,” she said.

(c) 2009, The Philadelphia Inquirer.

Distributed by McClatchy-Tribune Information Services.

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Home Prices Fall But Sales Continue to Climb

November 11, 2009

A real estate group says home prices fell in eight out of every 10 U.S. cities in the third quarter of this year as heavily discounted distressed sales made up 30 percent of all deals.

But home sales continued their climb, with quarterly sales outpacing the second quarter and the previous year’s figures, the National Association of Realtors said Tuesday.

The median sales prices of existing homes declined in 123 out of 153 metropolitan areas compared with the same period a year ago. Prices rose in the other 30 cities.

The national median price was $177,900, or 11 percent below that of the third quarter last year.

“The decline in the national median price has moderated recently, and a shrinking supply of unsold inventory suggests we are getting closer to price stabilization in many areas,” said Lawrence Yun, the group’s chief economist. “But we need a steady stream of financially qualified buyers to further reduce inventory and get us to a self-sustaining market.”

Separately, the Treasury Department said Tuesday that as of the end of October, more than 650,000 borrowers, or 20 percent of those eligible, had signed up for the Obama administration’s mortgage-relief program to reduce monthly payments to more affordable levels.

Launched with great fanfare in March, the plan got off to a weak start, but now nearly 920,000 loan-modification offers have been sent to more than 3.2 million eligible homeowners. That works out to 29 percent, up from 15 percent at the end of July.

The homes report said prices in Fort Myers, Fla., plunged 40 percent to $98,000 from a year ago, the worst in the nation. Las Vegas saw its median price tumble almost 35 percent to $138,500 year over year.

The largest price gain, by contrast, was in Cumberland, Md., where prices jumped 19 percent to $122,100. Davenport, Iowa, followed with an increase of 14 percent to $115,600.

The federal tax credit of up to $8,000 for first-time homebuyers helped boost sales in the third quarter. U.S. home sales rose in 45 states from the second quarter, with 28 states posting double-digit gains.

Total quarterly sales reached a seasonally adjusted annual rate of 5.3 million, up more than 11 percent from 4.76 million in the second quarter.

President Obama signed a bill last week extending and expanding the federal tax credit. Now, buyers who have owned their current homes for at least five years are eligible for tax credits of up to $6,500. First-time homebuyers – or anyone who hasn’t owned a home in the past three years – would still get up to $8,000. To qualify, buyers have to sign a purchase agreement by April 30, 2010, and close by June 30.

Meanwhile, though the Obama administration’s mortgage-relief program has reached one in five eligible homeowners, most of those borrowers are on temporary trial plans.

To make the change permanent, borrowers must complete a big stack of paperwork and show they can make their payments on time. At the beginning of September, only about 1,700 permanent modifications had been made. The Treasury Department expects to release updated data later this month.sold2

“We’re seeing some early indications that the servicers haven’t done enough to get all the documents in,” said Michael Barr, an assistant Treasury secretary.

In California, about 130,000 homeowners have been enrolled in the “Making Home Affordable” loan-modification plan. That works out to about 19 percent of the state’s homeowners who were either two payments behind or in foreclosure at the end of last month, according to Treasury Department data.

Two other hard-hit states, Arizona and Nevada, had similar rates of assistance as California, at 22 percent and 18 percent respectively. Florida, however, was much lower, at 12 percent, possibly because of high numbers of investor-owned properties that don’t qualify for the program.

Government officials say they are pressing mortgage companies hard to improve their performance. Still, many housing advocates have been disappointed with the $50 billion plan’s progress and say that getting a loan modification remains a battle.

Source: The Washington Times

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Written by djumper · Filed Under Real Estate Blog 

Freddie Mac Takes Its Home Affordable Modification Program to the Streets

October 19, 2009

Freddie Mac is taking the Home Affordable Modification Program to the front door of borrowers who are even a little behind on their mortgage payments.

Three months ago, Freddie Mac hired a firm, Home Retention Services Inc., to help overworked mortgage servicers process loan modification applications. Now government-controlled Freddie is going one better by hiring another company, Titanium Solutions, to personally visit delinquent borrowers to speed up the process to modify Freddie-backed mortgages.

Freddie Mac holds 9% of the nation’s 4.2 million seriously delinquent mortgages, those that are at least 90 days past due. This effort is meant to get to those borrowers before they fall that far behind. “The statistics continually show that the earlier you intervene, the greater the likelihood for success,” said Freddie Mac spokesman Brad German. “We want to intervene early. We want to provide delinquent borrowers with the same attention and guidance that they got when they bought a home.”

Titanium representatives plan to go to the homes of borrowers who are at least 31 days behind on a mortgage payment and who either haven’t responded to previous outreach efforts by servicers or those who have begun the process but need to provide more documentation for the application. They also aim to help homeowners who already have a trial modification under way get the paperwork done to receive a final modification.

It’s an ambitious, aggressive effort that could do some good, particularly given the frustrations of the loan modification process, with borrowers sometimes kept on hold for an hour at a time during phone calls with servicers and crowding high school gyms, waiting hours to meet with servicers. But at a time when troubled homeowners are being taken advantage of, there’s cause for concern, too.

Mortgage rescue scams are sweeping the country, as imposters knock on doors, promising troubled borrowers that they’ll save their homes, all for a fee. Freddie Mac says it’s taking steps to safeguard its latest effort. To lessen the chances of imposters pretending to be Titanium representatives, borrowers first will receive a letter, a sort of heads up that a visit is forthcoming. The Titanium representatives going door-to-door will be carrying a copy of the original letter from the servicer detailing the government’s mortgage modification plan. They’ll also know specific information that only a legitimate representative for a servicer would know, like the mortgage’s balance.

FreddieMost important, since applying for HAMP is free, borrowers won’t be asked to pay any fees for the meeting or the assistance offered.

Higher FHA down payments ahead? For months, local condo developers have lined up to get their projects approved by the Federal Housing Administration because a FHA-backed loan requires a down payment of only 3.5%. The low down payment, particularly attractive to first-time buyers, has resulted in plenty of FHA-backed home-lending. Now there’s a move afoot that might make FHA loans not quite as attractive to borrowers. Legislation recently introduced into the U.S. House of Representatives by Rep. Scott Garrett, R-N.J., would raise the minimum down payment to 5% and no longer allow the closing costs to be included in the FHA loan amount.

In introducing the bill, the congressman said his goal was not to stymie homeownership efforts but to protect the FHA and ultimately, taxpayers. The bill comes a few weeks after the FHA announced that because of the mortgage crisis, its cash reserves had fallen below the level set by Congress.

“As we have learned repeatedly throughout the mortgage crisis, the amount of equity a homeowner has in their home directly correlates to the credit risk associated to their mortgage,” Garrett said. FHA-backed loans, which accounted for only 5.5% of loans in 2007, rose to 19.6% in 2008 and now account for about 25% of mortgages.

(c) 2009, Chicago Tribune.

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Written by djumper · Filed Under Real Estate Blog 

Foreclosure Activity Increases 5% in Third Quarter

October 15, 2009

RealtyTrac, one of the leading online marketplaces for foreclosure properties, released its U.S. Foreclosure Market Report for Q3 2009, which shows that foreclosure filings—default notices, scheduled auctions and bank repossessions—were reported on 937,840 properties in the third quarter, a 5% increase from the previous quarter and an increase of nearly 23% from Q3 2008. One in every 136 U.S. housing units received a foreclosure filing during the quarter—the highest quarterly foreclosure rate since RealtyTrac began issuing its report in the first quarter of 2005.Foreclosure1

Foreclosure filings were reported on 343,638 properties in September, a 4% decrease from the previous month but a 29% increase from September 2008. Despite the monthly decrease, September’s total was still the third highest monthly total since the RealtyTrac report began in January 2005, behind only July and August of this year.

“Bank repossessions, or REOs, jumped 21% from the second quarter to the third quarter, corresponding to jumps in defaults and scheduled auctions in the previous two quarters,” said James J. Saccacio, chief executive officer of RealtyTrac. “REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan modification efforts and high volumes of distressed properties.”

Source: RISMedia

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Written by djumper · Filed Under Real Estate Blog 

BoA Struggles With Loan Modifications

October 14, 2009

Bank of America could collect about $6 billion if it meets the deadline set by the federal government to help struggling borrowers for the Making Home Affordable program.

But the Treasury Department released a report last week that showed that only 11 percent, about 95,000, of Bank of America’s delinquent borrowers who are potentially eligible for the program have been given a loan modification. That puts Bank of America at the bottom of the list of major banks involved in the program.BoA

“We’re sure working hard,” said Ken Scheller, senior vice president for home retention at Bank of America, when asked about his company’s low success rate. “We don’t want to be down there.”

There appear to be multiple problems, not the least of which is that many of the employees handling the modifications are completely new to the business. Angry investors complicate the issue, with 15 percent of them demanding that the bank get their approval for every single case.

Source: REALTOR.org

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Written by djumper · Filed Under Real Estate Blog 

Overcoming Fear of Foreclosure Critcal for Many People to Keep Their Homes

October 12, 2009

Foreclosure numbers continue to rise and many homeowners are at an increased risk of losing their home. While foreclosure can be prevented, many homeowners remain confused or afraid to confront their mortgage problems and take action to help save their home. “Fear often prevents many consumers from seeking help,” said Michelle Jones, senior vice president of counseling for Consumer Credit Counseling Service (CCCS) of Greater Atlanta, Inc. “Overcoming these fears can mean the difference between staying in your home and losing it.”Foreclosure

CCCS counselors address some of the common fears homeowners have about seeking help:

Fear: Homeowners are afraid to let the mortgage company know they are having a problem because they think it will speed up the foreclosure process.

Contacting your lender is an important first step if you want to save your home from foreclosure. It provides you with an opportunity to explain why you have fallen behind on your payments and what steps you are taking to get back on track. Lenders have a financial interest in keeping you in your home and may be willing to alter the terms of your loan or devise a repayment plan.

Fear: Homeowners believe that if their mortgage company has already turned them down for a loan modification, there is no point in contacting a counseling agency.

Many homeowners are turned down for a loan modification because the information they provide to their lender indicates that their expenses exceed their income or that they have not provided accurate documentation and information about their loan. In other cases, the lender may have made a processing error or the investor who owns the loan will not modify loans in accordance with the Making Home Affordable program.

A housing counselor may be able to suggest alternatives that better suit your current financial situation or help you make adjustments that make you a better candidate for a loan modification with your lender.

Fear: Homeowners fear being judged by others for seeking help.

These are challenging financial times. While it may feel like you are the only one struggling, the reality is that many of your friends and neighbors are also finding it difficult to stay afloat. By seeking help, you will not only increase your chances of avoiding foreclosure, you may also serve as an inspiration to others.

Fear: Homeowners think it is better to use all of their financial resources before seeking help.

Many homeowners try to ride out the financial storm, using their savings and depleting their retirement accounts before seeking help. By the time they do seek help, they are in an even more desperate financial situation and they have spent the resources that may have given them more options in dealing with their mortgage crisis.

Fear: Homeowners facing foreclosure fear that their situation is hopeless.

For homeowners facing foreclosure, the feelings of hopelessness and despair can be overwhelming. While for some, seeking help may mean saving their home, it is inevitable that some homeowners will end up in foreclosure. A certified housing counselor can help homeowners work through the foreclosure and build a new path for long term financial success.

Fear: Companies claiming they can save your home charge large, up-front fees.

You can receive counseling from a reputable, nonprofit housing counseling agency at no charge. While there are unscrupulous businesses looking to take advantage of homeowners, there are also many HUD-approved housing counseling agencies that offer help for struggling consumers.

For more information, visit www.cccsinc.org.

Source: RISMedia

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Written by djumper · Filed Under Real Estate Blog