Short Sale Industry Updates

HAFA Extended Help for Homeowners and Changes!

 In January, the Federal Housing Finance Authority announced that Fannie Mae and Freddie Mac would be extending and enhancing their Home Affordable Modification Program (HAMP) and Home Affordable Foreclosure Alternative (HAFA) program through December 31, 2013. The U.S. Department of the Treasury announced the extension for non-GSE Servicers (non-Fannie Mae, non-Freddie Mac) earlier this month adding that any HAMP or HAFA transaction has to be completed by September 30, 2014.

The Making Home Affordable program also made some significant changes that will help many homeowners qualify more easily for the programs. In addition to the extension, the following changes include:

• There are no longer occupancy requirements for HAFA eligibility. Previous guidelines stated the homeowner had to have occupied the property as their primary residence at some point in the prior 12 months.
• Second Mortgages can now get up to $8,500. Prior guidelines called for a maximum of $6,000 to a second lien holder.
• Servicers can now accept a full payment, if the borrower requests to make a full contractual payment in order to stay current on their loan.

Foreclosures are on the Rise!

 It was not long after the news about the big lender’s $25 billion settlement came out that the foreclosure statistics for February’s were posted.

 Since the settlement was reached, the number of foreclosures escalated. It is believed that because of the number of claims filed in the third quarter of 2010 for incorrect or improper foreclosure, many banks put a hold on their foreclosures. Now that the settlement was reached, these banks have taken these delinquent home loans out of limbo and put them back on the foreclosure track. This caused both an increase in the number of properties put into foreclosure last month and increased the number of properties that actually completed the foreclosure process. Judicial foreclosure states climbed the highest in numbers with a 24% increase from February last year.

 Property Values still Falling!

 Because of the escalating number of foreclosures in the market and the anticipated REO inventory to enter the market, property values continue to fall.   Industry experts say that many of the metropolitan areas, Denver included, will not see property values bottom out until the end of 2013. This is not the news homeowners want to hear when they are upside on their mortgage and struggling to stay in their homes, but it does justify the extension of the HAMP and HAFA programs and it continues to bring buyers to the table. The purchase prices are very attractive right now for homebuyers, especially investors and people in the market for a second home.

 Investor Challenges

 While the current market is ideal for investors, the ever-changing guidelines can create investor challenges. While the government tries to put together a recipe that will fix the industry, they are hindering today’s buyers. Despite the efforts are being made to help homeowners, the number of short sales and foreclosures continue to climb and property values continue to fall. This makes it a buyer’s market, but the banks are making it more challenging for investors to buy REO and short sale properties and retail buyers struggle to obtain financing.

 FSBO Short Sale’s

 Lenders, big and small, are changing their rules. More lenders are denying For Sale by Owner (FSBO) short sale transactions. This affects the investors who market directly to distressed homeowners to buy their home. One would think the lender would like to save the commissions, but this is not the case.   Therefore, it makes sense to find out if the short sale lender accepts FSBO transaction before you submit a short sale package.

Banks that won’t allow FSBO:

1. Bank of America (Equator Deals)

1. PNC

BPO’s

 Lastly, BPO results can make or break any short sale deal. While property investors focus on the ‘non-perfect’ properties to either flip or buy as a rental, they are frequently up against the hired appraiser or BPO Agent who is required to use retail comps and disregard any cosmetic and/or aesthetic issue when considering the property’s value. If the house has issues and is in need of extensive repairs, the retail buyer does not want it and the investor will not be able to fix it within their margin, so many times the short sale ends up gridlocked unless the property value can be disputed. While many lenders will allow you to try to dispute their value, the requirements to dispute have also become challenging. Always meet the BPO / Appraiser at the property with comps and repair estimates in hand!!