Are you looking to increase your short sale opportunities? If you are, you are doing the right thing as short sales are expected to be around until 2015.

Listen to this podcast from Ivan Choi, a former Bank of America executive, that claims the short sale and real estate owned (REO) shadow inventory will be a problem through 2015.
http://media.ksro.com/Podcasts/1392/MikeKelly030710.MP3

WHB Solutions has been actively working short sale transactions for the past four years and each year, the numbers of increasing short sale opportunities have been staggering. We have helped to save the careers of hundreds of real estate professionals by teaching how to be successful with short sales. But the once learning to do complete a short sale is achieved; many real estate professionals do not plan on finding more short sales as they feel it will only be available temporarily.

We have seen real estate professionals triple their sales pipelines by going after short sale opportunities and in a down housing market, it is important to go back to the basics of how to get more business in the current market.

On Jan 2010, it was reported that 1 in 7 homeowners were either 90+ days late on their mortgage or already facing foreclosures. Short sales deals are not hard to find and if you are not finding them, you are not doing an effective job becoming a go to person for short sale transactions.

To become a short sale expert, it is important to know you cannot do it all alone. With any job, to become an expert, you must have recent and relevant experience. But with the changing housing market, it does become hard to keep on top of lender trends and strategies that help get short sales closed. Not only do we provide educational materials from A-Z to qualify and close a short sale, but we provide a community of short sale experts that you can collaborate with and learn tips and secrets to get your short sale closed. This is the edge many agents are missing, but once achieved, you must market yourself as a short sale expert.

(To register to become a member of our short sale community, visit http://whbsolutions.com/members/members-only)

Once you are recognized as a short sale expert, you need to work on your networking abilities to gain referrals from other professionals who are dealing with homeowners in trouble every single day. Contacting every professional listed below should increase your short sale opportunities over the next few years:

1) Mortgage Originators – Anyone who is still originating loans, either full or part-time, should have access to a large network of past clients or current clients who are in trouble with their mortgage.
2) Real Estate Agents – Many real estate agents are avoiding the frustrations of short sales, but they do have clients that need help. Network with other real estate agents and find out if you can partner up and help their clients with their short sale options.
3) Friends and Family – At the height of the housing boom, everyone knew a loan agent that could get anyone financing to buy a home. The difference now is that is it easy to find someone who needs help with a mortgage underwater. Contact your friends and family and put the word out that you are a short sale expert and you can help homeowners in trouble.
4) Agents Who Left the Business – You may even want to contact loan originators or real estate agents that have left the business as they most likely will have a list of clients who are in trouble but never tried to contact them to help. It’s the sad truth, but can be advantage and these clients are looking for new representation. It’s time to continue to build your future prospect list. You will be seen as a savior and your name will travel through different networks.
5) Tax Professionals – There are many clients who are contacting their tax person to find out tax consequences of filing bankruptcy, walking away from their home, doing a short sale, etc. Get the word out that you are a source to help their clients with their short sale option.
6) Bankruptcy Attorneys – Clients at this stage have given up on everything but short sale opportunities are golden here as working the a bankruptcy attorney, they can approve the release of a property in order for a short sale to complete.
7) Appraisers – The appraisal business has changed a lot as many of them are contracted directly by a lender. But in the past, many of these appraisers worked closely with real estate agents. Get them to refer you as a short sale expert and get an introduction to see how you can help them close short sale transactions.

Register to become a member of our short sale community, visit http://whbsolutions.com/members/members-only.

A Broker Price Opinion, or BPO, is the evaluation and estimation of a property that is typically performed by a local real estate broker. A BPO is more accurate than an AVM (Automated Value Model), which requires no on site visit but provides a value based on historical price, market conditions, and comparables. The BPO value estimate is not as thorough as a full appraisal but is cheaper than hiring an appraiser to do this work. The BPO value is the key to whether or not your short sale transaction gets approved or rejected.

A lender typically orders the BPO when a short sale is being considered. If a lender has ordered an appraisal, then this is good news as they hae deemed your short sale file as a qualfied candidate. The value that is provided by the BPO inspection is provided to the lender to compare if the current short sale offer is reasonable. If there is a huge discrepancy with the BPO value and the short sale offer, they would question the validity of the short sale offer and will reject the short sale offer. Bank of America has been known to do this with thier short sale transaction. Once a value is grossly underestimated based on the BPO, the file will be closed almost immediately, unless you jump in and negotiate with reason and facts as to why your offer is an accurate representation of the market value.

The problem: The person performing the BPO is hired by the lender, which is usually a local real estate agent, and may not know the market of the subject property. In one of our short sale files, we had a subject property that was on the border of a neighborhood that clearly had a 50-100K difference in value. The real estate agent lumped properties from both neighborhoods and came in with an incorrect BPO. We had to make past years comps to prove that the difference in values from both neighborhoods and once this was presented to the lender’s investors, they finally approved the short sale.

Keep in mind he BPO is just an estimate and if the BPO value is not in line with the offer you submitted, you will have a problem. If the BPO value is higher than your offer, they will think you are low balling them and if the BPO value is lower than your offer, they may approve the loan. Yes, that’s right, they MAY approve it. We had a scenario when a lender asked us to lower our purchase offer to keep in line with the BPO value. We were quite surprised.

There are two type of BPOs ordered by the lender. A drive by and a physical on site inspection. We always push for a on site inspection as it greatly increases the accuracy of the BPO value. It is always suggested to meet the real estate agent performing the BPO to validate that they are valuating the subject property correctly. It has been reported that lenders try to get a BPO that is in their favor. No offical word on this as no one want to admit this is happening, but it does. Many real estate agents doing these BPOs don’t want to meet with you because they always think you are there to influence their decision on the value.

What are the duties of the real estate agent perfrming the BPO?

1. Pull recent comparables
2. Photograph the property and the surrounding area
3. Estimate any repair costs
4. Provide an opinion of the makret value of the property
5. Create a report and send it to the lender

Note: Use a guideline of 90% of the BPO to be an acceptable offer by the lender. If the BPO is 200K, your offer should be at least 180K. A BPO higher than your offer will almost always kill your deal so you must be prepared to fight and request another BPO, which some lenders will do, or provide materail data to prove them wrong.

How you can help get a correct BPO value?

1. Do your own research – Do not expect the BPO to be accurate. Do your own research and include any facts that would affect the market value of the subject property, such as needed repairs. If the BPO is found to be incorrect, all your research can be used to prove thm wrong.
2. Be there for the BPO – If you can arrange to be present at the BPO, make sure you note any points that the real estate agent may not be aware of so that they come in with an accurate appraisal.
3. Show the property as-is – There is no need to clean up the property or do any fixes. If there are damages that may not be obvious, point them out, i.e. termite damage or foundation issues.
4. Compare notes - After te BPO inspection is done, ensure that you have clearly mentioned anything that will help the real estate agent form an accurate opinion of the market value. Do not push to make it seem you are trying to influence their decision in your favor. Rather, make it as if you are just trying to help them do their job.
5. Follow up with lender - Check to see if the lender has received the BPO and be prepared to provide additional data regarding the market value of the subject property, espcially if the value comes in higher than your purchase offer. Use the research you put together as ammunitiion.

If you have any great insights into BPOs, please do share them and reply to this article. We will post any new information on our blog (www.whbsolutions.com/blog) or short sale community site (www.whbsolutions.com/members).

Negotiate with only one lien holder is the best short sale scenario, but what do you do when there are multiple liens with the same lender? It has been WHB Solutions experience that negotiating with the same lender can be an advantage depending on the lender.

For example, if both the first and second loans were held by Chase, there is a good chance of getting a short sale closed. If there was one loan with Countrywide and a second loan with Bank of America, it will be hard to get a short sale closed. Even though Bank of America bought Countrywide, they have different loss mitigation departments with different short sale approval guidelines.

We a short sale file that we could not close because Bank of America, as the first lender, would only give Countrywide $3000 in a short sale approval. Countrywide wanted $25,000 and would not give a short sale approval unless this was received. We tried to provide reason and arguments on how Countrywide would receive nothing if the property went to foreclosure and that they are technically the same bank and the overall short sale would net more money than going to foreclosure. Countrywide was so stubborn to get their money, they ended up getting nothing. It does not make any sense.

In a case where you have two loans that were originated from the same lender, it has been our experience that the second lien holder is more flexible. A typically response is that the second lien holder would give an approval for $3000 any day, but no full release or giving up their rights to deficiency is provided. Depending on the homeowner’s situation, they may be excluded from any future deficiency rights. Either they prove insolvency to the IRS or they qualify for the primary residence exclusion rules.

Typically, in any short sale negotiations, getting an agreement from the second lien holder should be obtained before going to the first lien holder. If this is not done, you would not have the right numbers to show what the first lender would net. So to avoid going back and forth with the both lenders, find out what the second lien holder is expecting to approve a short sale first.

In the majority of short sales, the first lien holder is the one who files for foreclosure. Once this filing occurs, many times, the second lien holder would move the loan to their Charge Off or Debt Recovery department. We have noticed that it is much easier to obtain an approval when this happens as the guidelines of providing an approval is less strict. At the point it is in debt recovery, the expectation is that the dollar amount they are looking to recover would be less than what would be expected if it was still with the loss mitigation department. Keep in mind that loans sent to a debt recovery department are sold on pennies on the dollar and there is a high possibility where no money would be recovered.

Short Sales are frustrating. This is a fact. After helping hundreds of real estate agents analyze and close their short sale deals, WHB Solutions has always asked why, without our help, they would avoid short sales. Many of the answers that come back were consistent with what all real estate professionals have been experiencing with short sales. The main difference in why they decided to pursue short sales was because they discovered WHB Solutions.

WHB Solutions have created a community of short sale experts and real estate professionals working with short sale transactions. It is due to our collaboration that we have been able to get short sales approved. Lender short sale approval guidelines have been a mystery, but through collaboration, we have narrowed down the lender trends and strategies that work and have clearly documented our best practices with short sales. Our short sale strategies have gotten 90% lender approvals on our short sale transactions.

(To register to become a member of our short sale community, visit www.whbsolutions.com/members.)

The following are the top ten reasons why real estate professionals avoid short sales:

1) Bankruptcy – When a homeowner files for bankruptcy, it helps to stop a foreclosure process. A short sale can still be performed, but it requires an approval from the bankruptcy attorney to release the property so a short sale attempt can be made. This is just means extra work for a real estate professional and it may increase the time to close a short sale, but it can still be done.

2) Sellers Misleading – When qualifying a homeowner for a short sale, the homeowner must be cooperative. Many homeowners start the process of a short sale yet to cancel the transaction midstream by deciding to walk away from the home or file bankruptcy. If you feel that a homeowner may not have true intentions of going through a short sale, you should walk away.

3) Multiple Lenders – We have closed short sales with multiple lien holders. For example, we had one file that was in bankruptcy, had two mortgage lenders, and five separate tax liens. It was because of a cooperative homeowner, we were able to get the short sale closed.

4) Lack of Agent Knowledge – Many real estate professionals have not done short sales and based on our experience it takes a dedicated resource handling short sales day in and day out to understand what it takes to get a short sale approved and closed. We provide all information to how a short sale needs to be properly processed for a high chance of approval and this is based on the hundreds of short sale files we have analyzed and closed.

5) Banks Taking too long to respond – As in any business, building relationships is important when working with a lender who takes too long to review a short sale file. WHB Solutions has worked enough short sale deals with lenders that we have actually been asked to send future short sale files to the same negotiator because of our proven experience. Many real estate professionals don’t do a high volume of short sales and are not able to establish any strong relationship with lenders.

6) Client Knowledge on consequences – Many real estate professionals do not know how to explain to their clients the consequences of a short sale and do not push for the homeowner to seek professional help when looking at their best options. It is this fact that causes a homeowner to not even attempt a short sale or stop mid-stream in a short sale process.

7) Lack of Communication – We have learned from the experience of multiple short sale transactions that communication has been a key factor to ensure the success of short sale transaction. Buyers were not updated with progress and end up looking for another home. Frequent touch points with the lender were not made and deals fell through because someone did not do their job and the property was sold at an auction. There are many reasons short sales fail due to lack of communication.

Consistency – Every lender has a different timeline when processing short sales and many real estate professionals have experienced inconsistent results, which causes a low level of confidence when working with short sales. All of our short sale education materials teach best practices that we have used to close our short sales that have been proven to work, regardless of the lien holder.

9) Buyers Walking – This is a major concern for any short sale transaction. Putting in hours of work, yet to have it fall apart because a buyer walks away from a deal is not a good feeling. That is why it is important to continue finding backup buyers and setting the right expectations with the current buyer.

10) Staffing/Resource Issues – It is possible for a real estate professional to single handedly become a short sale expert. But it is our opinion that the best results occur when there is a team in place. Unless short sales are 100% of your sale pipeline, one resource cannot be used to make endless phone calls to a lender to get a single transaction closed. Our short sale training materials is formatted in such a way that a single resource can work through a single short sale transaction to closure. Being a member of our short sale community will also aid to the success of any short sale file.

Become a short sale expert and register to become a member of our short sale community, visit www.whbsolutions.com/members.

By Art Lee
WHB Solutions, Certified Distressed Property Expert & Short Sales Education

Where are the cheapest homes for sale? Investors with deep pockets are picking up homes for 50% of current market value, regular home shoppers are looking for similar deals but do not want to pay all cash or in bulk. You may want to sit on the fence as home values will most likely go lower in 2010.

The Los Angeles Times reported the following news headline Feb 16, 2010, “New wave of foreclosures by end of 2010 is feared” (http://www.latimes.com/business/la-fi-mortgage-mods17-2010feb17,0,7573498.story). This is just one of the many news articles reporting how further foreclosures will eventually occur in 2010 and the result would be lower home prices in many communities.

Moody’s Economy.com has reported that approximately 4 million homeowners are 90+ days late on their mortgage or are already facing foreclosure proceedings. This number was pulled from data analyzed from credit reporting agency Equifax.

There have been other news articles stating that the number of foreclosure filing are slowing down and a lot of market analysts are optimistic that recovery is near. But….Economy.com com estimated that 2.4 Million borrowers are expected to lose their home this year. 2009, there were 2.1 million foreclosures. With the job market still crawling with company’s trying to find new ways of surviving, it is assured that more homeowners will foreclose and the number of foreclosures that will occur this year will definitely lower home values in neighborhoods by 15-50% of current market values. All it takes is for one home in a neighborhood to sell below market value to bring all other home comparable values down.

The states to be hit the hardest is California, Florida, and Nevada. The one statistic I love to watch is California foreclosures. In December, Californians that were 90+ days late on their mortgage hit 11.4%, compared to 8.4% nationwide. California is definitely a state that is filled with frustrated homeowners that complain about the red tape of lenders and I suspect because of this fact, many of these homeowners will give up and just walk away.

If you can get a home at 80% of current market value, it should be safe even if the housing values pull back 20%. Obviously, the larger discount the better. Consider picking up fixer uppers that you can rent and fix up later to sell when the housing market improves. Based on current market activities, the best deals for 2010 will most likely be found at the end of the year after the floodgates open and foreclosures flood the market.

Many people do not understand what it takes to get qualified for a loan modification. The general rule of getting approved is that you must be able to afford it! What this means is that you should be able to show income and assets that will allow you to carry your mortgage with a low risk of re-defaulting. But, qualifying for loan modification is almost the same as qualifying for a traditional loan without pulling credit or getting an appraisal.

Lenders will qualify you for a loan modification if it makes sense. For example, if a lender has to reduce your mortgage rate to 1% in order to qualify you for a loan modification, you can forget getting approved. Here is a general rule of thumb to determine if you are wasting your time pursuing a loan modification:

Calculate ALL of your monthly expenses. If you pay your home insurance bi-annually, break this cost down on a monthly basis. Then calculate ALL of your income, to include interest, bonuses, commissions, etc. If you are positive or negative about $200, you have a good chance of getting a loan modification. If the lender is able to modify your loan so that you can save $700/mth then it is believed you would have a better chance of handling any financial setbacks and reduce the risk of you defaulting on your loan.

To better understand a homeowners chance of getting a loan modification, here are some truths to know:

1. It has been reported that candidates who received a loan modification defaulted again within 6 months

2. In order to get a loan modification approved, you need to have enough income to cover all of your monthly expenses. For example, if your current monthly expenses allow for $200 to savings, you may be able to qualify for a loan modification. The idea is that the loan modification would allow you to save more money and rebuild your financial status.

3. Proof of a stable job will also be counted towards qualification. The number of years you have worked consistently and what company you work for are taken into consideration. Also, having significant savings in a retirement account can help as well.

4. If you are not late on your mortgage, it will be harder to get a loan modification approved. Lenders may not state it, but being late is proof that you are having financial issues and are more willing to help when you are in this position. This is the same for short sales and is a reason why some homeowners have been advised to miss payments prior to requesting a loan modification.

5. Loan modifications can take anywhere from one to twelve months to complete, depending on your situation.

6. Many loan modifications that can be done quickly are changes in the mortgage terms to reduce the monthly payment, but this is usually for a short term 2-3 years. After this period, the rates will go up and so will the payments.

7. It is possible for some lenders to offer a loan modification of a new fixed rate over 30 years.

8. Attempting a reduction in rate and principal is generally more difficult to obtain. A lender would rather give you a lower rate for a longer period than reduce principal.

9. If you have multiple liens on your property, it is more important to get a loan modification on the loan with the higher balance.

10. Many loan modifications do not get approved. If you are at risk of being late, or are already late, start your loan modification immediately to allow time for you to pursue other options if needed, such as a Short Sale or Bankruptcy.

Is it Legal for a Foreclosure Consultant to collect Advanced Fees?

In California, anyone that falls under their definition as a “foreclosure consultant” is not allowed to collect any advanced fees up, even if it is an attorney. Previously, California licensed lawyers who are providing these same services were exempt from this law. All services must be performed and completed before collecting any fees.Check your state laws for rules against advanced fees.

Non-profit agencies that can help you with your situation and can represent you for a fee AFTER work has completed are as follows:

* Federal Housing Administration
* Hope Alliance Web site

The following information from the California Association of Realtors was provided to address the many new laws that affect California Realtors and their clients. These new laws were published in conclusion of the first half of the 2009-2010 legislative session. The laws mentioned are a interpretations and full legislation details on the new bills passed can be found on the internet www.leginfo.ca.gov.

REAL ESTATE
REO Buyer Can Select Escrow and Title: Effective October 11, 2009 to January 1, 2015. Assembly Bill 957.
The buyer in an REO transaction is free to select their own escrow and title company. A lender that subjects the buyer to use a specific company will be held liable.

MORTGAGES
No Advance Fee Loan Modifications: Effective October 11, 2009 – January 1, 2013. Senate Bill 94.
This law addresses the high number of scams asking for upfront fees by prohibiting any compensation for performing a loan modification until all services are provided as promised. This law applies to any real estate agent and attorney.

Mortgage Loan Originators Regulated: Effective December 2010. Senate Bill 36.
Mortgage loan originators that negotiate terms for a mortgage loan for compensation are now regulated by the Mortgage Licensing System, this includes finance and residential mortgage lenders. What this means is more laws and restrictions will be applied to these professionals.

Mortgage Broker Activities Restricted: Effective January 1, 2010, Assembly Bill 260.
It is a mortgage broker’s fiduciary duty to put a borrower’s financial interest first. It puts restrictions on the arrangement of high-priced mortgage loans, pre-payment penalties, yield spread premiums, and negative amortization loans.

Mortgage Fraud Becomes a State Crime: Effective January 1, 2010, Senate Bill 230.
Any activities of mortgage lending processing with an intent to influence the process is seen as mortgage fraud under CA law. If found guilty, the crime is punishable with one-year in prison.

Reverse Mortgages: Effective January 1, 2010, Assembly Bill 329.
There are now new disclosures along with other requirements under the Reverse Mortgage Elder Protection Act that must be followed in any reverse mortgage transaction.

INVESTORS
60-Day Notice to Terminate Tenants Extended: Senate Bill 290.
60 day notice from a monthly residential tenant will still be law indefinitely. If a tenant has lived in a property for less than one year or is on a termed lease, a 30 day notice is sufficient. Other tenant laws were also addressed in this bill.

Landlord Utilities: Senate Bill 120.
This bill requires some utility companies to notify residential tenants if the landlord has been past due on bills which would result in the discontinuation of services. This protects the tenant form not have basic services and allows the tenant to put the utilities in their names to avoid an interruption in service.

Mobilehome Parks: Senate Bill 804
Management cannot make a homeowner use a specific broker or dealer to replace a mobilehome or manufactured home on a space in a mobilehome park.

OTHER AREAS OF REAL ESTATE
Appraisal Industry Oversight:Effective January 1, 2010, Senate Bill 237.
Background checks on all certified appraisers. Further expands the definition of what is considered appraisal fraud, including promotions, promises, threats, compensations.

Increase in Homestead Exemptions: Effective January 1, 2010, Assembly Bill 1046.
Homestead exemptions increase $75,000 for individuals, $100,000 for married couples, and $175,00 for persons over 65, disabled or 55 with limited income. The homestead exemption is to protect a homeowner’s equity from judgment creditors.

Swimming Pools: Assembly Bill 1020
This bill states that owners of apartment buildings, condominium complexes, and others, must place anti-entrapment devices for swimming pools. Also required is additional filing of compliance statements.

Mechanic’s Liens: Assembly Bill 457
New guidelines and processing, filing, and enforcing a Notice of Mechanic’s Lien.

Disposal of Records: Assembly Bill 1094
Liability business are now shielded if they property dispose of abandoned records via shredding or erasing the information. It is also legally presumed that a tenant shall own their records on the premises even after their lease has been terminated.

Plumbing Fixtures: Effective on or after January 1, 2014, Senate Bill 407
New disclosure requirements for the installation of water-conserving plumbing fixtures.

1) Communication – Lenders do not like to talk to people who are rude or who are disorganized when on a call. Be courteous and efficient when making calls. Have all information and paperwork in front of you and be well prepared time is not wasted. Lenders have to field calls all day and it can be frustrating for them to talk to people who are fumbling for questions and information.

2) Sense of Urgency – If you show a sense of urgency to the lender and respond to all calls, letters and emails in a prompt fashion, the lender will most likely treat your file the same way. They know you are on top of your file and are doing everything you can to make sure the process is moving along. It will be much appreciated as they know they won’t have to spend much time tracking you down if they need something from you.

3) Create a Proposal/Solution: Lender have so many short sale files to process, it really helps when you help them see the light but it must be reasonable. Do not expect that the bank is desperate to give a huge discount. Create a Net Sheet showing what they would get if the home went to foreclosure, then show the current estimated value through comparables and days on the market plus realtor commissions, past taxes, etc. Then show the different offer amounts and show that you are submitting the highest one.

4) Create Feeling of Cooperation – Create a sense of cooperation with the lender that everyone involved is trying to work together to come to a solution. Whether this is the listing and buying agent cutting commissions ½ percent or showing the buyer to agree to pay a little extra to close the deal.

5) Talk the Same Language as the Lender – The lender doesn’t need to hear another sob story about how the homeowners are good people and really tried to pay their mortgage. Talk their language and give them solutions that will work and do not demand they stop the foreclosure. Understand how the lender will see the deal and what needs to happen to get a short sale approved. This is where the Net sheet comes into play as it is exactly what they need to be looking at in order to make a decision.

6) Knowledge of your File – Make sure you know all the details of your file as the negotiator does not have time to wait for your answers and if can answer all of their questions, they will be more willing to work with you as they know conversations can be expedited. This is where you should have your file in front of you every time you make a call so you are well prepared with any questions they may have.

7) Learn about the Lender – Different lenders will look at your short sale file differently. An institutional lender will handle the foreclosure differently than a private lender. Typically, a private lender would be less willing to budge or make things happen, especially if they are a second lien holder. The type of lender will determine how you will negotiate with them.

Mention the Loss to the Lender – Even though a Net sheet is put together to show the costs they will incur if the property goes back into their inventory, but do remember to point out things such as they will lose money due to the costs of the foreclosure, back payments, wear and tear to the property, marketing costs to sell the property, etc. This will prove to them that the costs to do nothing will be much higher.

9) Create an effective hardship letter – Make sure that when the homeowner creates a hardship letter is provides a clear understanding of why the homeowner can no longer carry the mortgage. Do not provide a 5 page report of the hardship, but point out key points that tie into the financial hardship and how it will not be resolved in the near future.

10) Stay on top of your files – Do not expect that the lender’s loss mitigation department is running on 100% efficiency. Many negotiators have hundreds of files to work on and it is easy for them to lose track of progress on any given file. If you requested to stop a foreclosure from going to auction, you need to call the court to make sure it has been stopped. If the court says they received no word from the lender, call your lender back and inform them nothing has been done. If you don’t do this, you may find yourself working months on a short sale transaction and having it lost because you assumed the negotiator did their job.

HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks.

HAFA is a complex program, with 43 pages of guidelines and forms, designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure. HAFA:

* Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
* Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
* Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
* Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).
* Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
* Uses standard processes, documents, and timeframes/deadlines.
* Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 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).
* Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements. The program sunsets on December 31, 2012.

http://activerain.com/blogsview/1367505/here-is-the-list-of-lenders-participating-in-mha-hamp-and-hafa Dawn Uselding

If you show a sense of urgency to the lender and respond to all calls, letters and emails in a prompt fashion, the lender will most likely treat your file the same way. They will see that you are on top of your file and are doing everything you can to make sure the process is moving along. It will be much appreciated as they know they won’t have to spend much time tracking you down if they need something from you.

As a best practice, every time you send something over to the lender, call to confirm that it was received. Every time you get an email or phone call, respond to it immediately. If the lender says they will do something, call back to make sure it has been done. Even if the lender is in processing mode and you have given them everything they need, check back twice a week to check status on the file. If the lender thinks you are calling too often, just ask them when is the best time to call back to check on the file. Do not be surprised if the lender says they are going to do something and they don’t.

Here is a real life proof of concept of how showing urgency is requires when working with a short sale submission:

A Real Estate Agent submits a short sale file and there is sixty days until the estimated trustee sale date. The file is processed but no approval and there is only one week left before it gets sold at the courthouse auction. Typically, lenders will not postpone a trustee sale until a few days before. The Real Estate Agent calls the lender for a status update and is told that the file is being reviewed by the investors and a decision should be made in ten days. The lender says they will postpone the trustee sale. A few days past and the Real Estate Agent picks up a call from the homeowner to hear they are being evicted as the house was been sold.

What the Real Estate Agent should have done was to call the county courthouse before the trustee sale to confirm it has been postponed. If it has not been postponed, a call should have been made to the lender to notify them the postponement notice was never sent. In this case, urgency and persistence was required as calls should have been made to between the courthouse and lender until confirmation is received from the courthouse.

You must also create a sense of urgency with everyone involved in the short sale transaction. If documentation needs to be collected from the buyer’s agent or from the homeowner, make sure you give deadlines and follow up on delivery. The faster you are able to turn things around the smoother the transaction will go.

Try to be proactive and identify any issues that may arise and try to act accordingly to avoid them. For example, check with the buyer’s agent to ensure that the buyer has been prequalified, so that when an approval is made, the loan process will move along much quicker to close. Ask for an approval letter, which can then be handed over to the lender. If the lender sees a buyer is ready to move forward with financing, they will be more willing to make the deal happen.

Collect any documentation that may be useful in helping the lender make their decision. If a couple of months have passed since the short sale submission, collect updated copies of the homeowner’s financial documentation as the lender may ask for these because they want to make sure their situation has not improved. Also, if the financial documentation shows additional hardship, that will certainly help with your approval.

If the comparable values have further decreased, that would be something you would want to send to your lender so they can see they need to expedite the approval process before things get worse. If they see values continuing to go down, they will see this as additional money lost, especially if the property goes back into their REO inventory for sale.