So is the end of HAMP near?  Looks like Congress is making a run at ending HAMP.

Sadly, HAMP never lived up to its touted goals and in fact mainly served as a way for servicers to line their folks while dragging homeowners through mountains of paperwork which was required to be faxed over and over.

Likely the short sale component of HAMP called HAFA will be disappearing as well.

Will this help or hurt homewoners?  Too early to tell.

- The Bank Slayer

The Fox News story is below:

House Committee to Push Bill Ending Obama Foreclosure Program

Published February 24, 2011 | Associated Press

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WASHINGTON — A House committee plans to write legislation next week ending the Obama administration’s flagship effort for helping struggling homeowners avoid foreclosure and abolishing three other housing assistance programs.

At its meeting next Thursday, the highest-profile target of the Republican-run House Financial Services Committee will be the Home Affordable Modification Program. The Treasury Department has acknowledged the program won’t meet its original goal of preventing 3 million to 4 million foreclosures, and last month a federal inspector general said it has been a failure.

The bill comes at a time when Republicans are proposing deep spending cuts across the federal budget. They have already pushed legislation through the House cutting this year’s spending by $61 billion, despite opposition by President Obama and congressional Democrats.

The committee will also vote on GOP plans to terminate programs that help state and local governments buy foreclosed properties and sell or rent them, provide loans to unemployed people who have fallen behind in their mortgage payments, and help restructure mortgages for people who owe more than their homes are worth.

Democrats are expected to oppose the Republican effort. House Democratic aides and Treasury spokesmen did not immediately respond to requests for comment.

Financial Services Chairman Spencer Bachus, R-Ala., who announced his committee’s meeting on Thursday, said the targeted programs have had little impact, have increased some homeowners’ debts and may have led to additional foreclosures.

“In an era of record-breaking deficits, it’s time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners,” Bachus said in a written statement.

The Home Affordable Modification Program is designed to help financially troubled homeowners reduce their monthly mortgage payments by offering them lower interest rates and longer repayment periods.

Foreclosures have remained high, with the foreclosure listing firm RealtyTrac Inc. saying there were 2.9 million foreclosure filings last year and over 3 million expected this year.

Even so, the modification program is expected to ultimately complete only 700,000 to 800,000 permanent modifications, according to a report issued last month by the government’s special inspector general overseeing the program.

The program “continues to fall dramatically short of any meaningful standard of success,” the report said.

America’s Servicing Company (“ASC”) / Wells Fargo look for any possible ways to deny loan modifications.

We have a client who had previously submitted their 66 pages of “loan modification required documents” in all its glory to ASC.   But then you know the drill…months pass by and many, many, many, more documents are faxed since ASC “didn’t receive them” (even though you have fax confirmations).

Then POW they summarily reject and deny the loan modification, without a warning or phone call.

When they came to us we started digging.  Why did it get denied?

Turns out the date was written BELOW the word Date instead of ABOVE it.   Let’s see now…the IRS accepted this as OK, but it’s not good enough for ASC?

Look here…We blacked out the person’s name but see for yourself.

What a joke!  They could have at least called and told the homeowner so they could have fixed it.

Ring, Ring.   “Hello.  ASC, Hi, it’s me.  Did you see my other post about the guy who got a free house.  Game on.”

- The Bank Slayer

H.R. 6133, “Prompt Decision for Qualification of Short Sale Act of 2010″ has been offered in the House but will it go anywhere?

Kudos to the National Association of Realtors for their support of a housing initiate that could help the mortgage/housing crisis, if it passes AND has some teeth.

We don’t need another sissy HAMP/HAFA-like program that offers “guidelines” for servicers and doesn’t provide punishment and remedies for home owners.

I’m not holding my breath yet. But it is a start.

- The Bank Slayer

Short Sale House

NAR Hails Bill to Hasten Lender Response to Short Sale Requests

Homeowners who are underwater with their mortgage may find that relief is on the way from a bill strongly supported by the National Association of Realtors® that would impose a deadline on lenders to respond to short-sale requests.

The legislation, H.R. 6133, “Prompt Decision for Qualification of Short Sale Act of 2010,” was offered yesterday in Congress by U.S. Reps. Robert Andrews (D-N.J.) and Tom Rooney (R-Fla.). The bill would require lenders to respond to consumer short sale requests within 45 days.

“The short sale, which requires lender approval, is an important instrument for homeowners who owe more than their home is worth,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “While the lending community has worked to improve the size and training of their short sales staffs, they still have a long way to go on improving response times.”

“As the leading advocate for homeownership issues, NAR believes that quicker attention to the short sales process is vital to help homeowners who are underwater and their communities, as well as the nation’s economy,” said Golder.

The number of potential short sale properties is rising across the country. According to NAR data, in the second quarter of 2010, Nevada, California, Florida and Arizona are states where significant shares of all properties on the market are potential short sales: 32 percent, 28 percent, 27 percent and 24 percent, respectively.

“Unfortunately, homeowners who need to execute a short sale are severely hampered because lenders (loan servicers) are unable to decide whether to approve a short sale within a reasonable amount of time. Potential homebuyers are walking away from purchasing short sale property because the lender has taken many months and still not responded to their request for an approval of a proposed short sale price. Many consumers have mentioned that the delay in short sale price approval exceeds 90 days, and in many cases never arrives,” Golder said.

She commended Reps. Andrews and Rooney for their efforts on the bill and urged Congress to pass the bill quickly

IndyMac is a shady operation.  One of our staff used to be on the inside working against homeowners but (in my words…turned his life around) and now battles for home owners.

He tells tales of “being trained” on programs like HAMP and seeing blacked out sections.   When he asked why IndyMac (now OneWest) redacted the HAMP training guidebook, his supervisor told him, “We don’t agree with those parts so you won’t be trained on them since we aren’t going to implement  it.”   Nice huh?

As a REALTOR you wonder, “Why don’t these banks follow the rules set out to help homeowners, like HAMP and HAFA?”  Because:

#1 they are guidelines, not laws.

#2 they don’t care and do what they want.

If you have an account or mortgage with what was IndyMac, below is info relating to what happened and supposedly who you can contact.   Thanks to Neil Garfield.   The mortgage companies have MERS.  He’s building HERS.      Stay tuned.

- The Bank Slayer

Information for IndyMac Bank, F.S.B., and IndyMac Federal Bank, F.S.B., Pasadena,

Introduction

1. Press Release
2. Acquiring Financial Institution
3. Question and Answer Sheet
   • En Español
   • Chinese Language Version (350 kb PDF File PDF Help)
4. Banking Services
5. Loan Customers
6. Unclaimed Deposits
7. Possible Claims Against The Failed Institution
   • FAQ re IndyMac “No Value” Determination
8. Priority of Claims
9. Dividend Information
10. Brokered Deposits (Institutional Brokers)
11. Agreements
    • Purchase and Assumption Agreement (1.1 mb PDF File – PDF Help)
    • Master Purchase Agreement by and among FDIC as Conservator for IndyMac Federal Bank, FSB and IMB HoldCo LLC, and OneWest Bank Group LLC (5.3 mb PDF File – PDF Help)
    • Loan Sale Agreement Between the FDIC as Receiver for IndyMac Federal Bank, FSB and OneWest Bank, FSB (3.5 mb PDF File –PDF Help)
    • Shared Loss Agreement Between the FDIC as Receiver for IndyMac Federal Bank, FSB and OneWest Bank, FSB (1.7 mb PDF File – PDF Help)
12. IndyMac Bank, F.S.B., Contact Information
    JavaScript is disabled or blocked. Alternatively, you may navigate towww2.fdic.gov/drrip/cs/index.asp and search for the contacts.
13. Balance Sheet Summary

I.  IntroductionOn March 19, 2009, the Federal Deposit Insurance Corporation (FDIC) completed the sale of IndyMac Federal Bank, FSB, Pasadena, California, to OneWest Bank, F.S.B., Pasadena, California.  OneWest Bank, FSB is a newly formed  federal savings bank organized by IMB HoldCo LLC.  All deposits of IndyMac Federal Bank, FSB have been transferred to OneWest Bank, FSB.OnJuly 11, 2008, IndyMac Bank, F.S.B., Pasadena, CA was closed by the Office of Thrift Supervision (OTS) and the FDIC was named Conservator.  All non-brokered insured deposit accounts and substantially all of the assets of IndyMac Bank, F.S.B. have been transferred to IndyMac Federal Bank, F.S.B. (IndyMac Federal Bank), Pasadena, CA “assuming institution”) a newly chartered full-service FDIC-insured institution.  No advance notice is given to the public when a financial institution is closed.

The FDIC has assembled useful information regarding your relationship with this institution.  Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution.  The FDIC has compiled the following information which should answer many of your questions.Back to top

II.  Press Release The FDIC has issued the following press releases (PR-56-2008, PR-42-2009) about the institution’s closure.  If you represent a media outlet and would like information about the closure, in California, please contactDavid Barr with the Office of Public Affairs at 202-898-6992, in Washington D.C. please contact Andrew Gray at 202-898-7192. Back to top

III.  Acquiring Financial InstitutionOn March 19, 2009, all deposits of IndyMac Federal Bank, FSB were transferred to OneWest Bank, FSB, (OneWest Bank) Pasadena, California.On July 11, 2008, all non-brokered insured deposit accounts were transferred to IndyMac Federal Bank, F.S.B. (IndyMac Federal Bank), Pasadena, CA (“assuming institution”) a newly chartered full-service FDIC-insured institution.  The OTS appointed the FDIC conservator of IndyMac Federal Bank.  All insured deposit accounts will be available as usual during regular business hours starting July 14, 2008.

Principal and interest on insured accounts, through July 11, 2008, are fully insured by the FDIC, up to the insurance limit of $100,000.  You will receive full payment for your insured account.  Certain entitlements and different types of accounts can be insured for more than the $100,000 limit.  IRA funds are insured separately from other types of accounts, up to a $250,000 limit.

All accounts that exceed the $100,000 insurance limit, and/or all accounts that appear to be related and exceed this limit, are reviewed by the FDIC to determine their ownership and insurance coverage.  If you think you might have uninsured deposits you should call the FDIC Call Center to arrange for a telephone interview with  a Claims Agent at 866-806-5919. The Claim Agent may direct you to download and submit a particular form that will assist in expediting the processing of your claim.

List of Affidavits, Declarations, and Forms available for download

Please return the forms to the FDIC by FAX (facsimile) or mail at the number or address listed for the failed institution.

If it is determined that you have uninsured funds, the FDIC will generate and mail to you a Receiver Certificate.  This certificate entitles you to share proportionately in any funds recovered through the disposal of the assets of IndyMac Bank, F.S.B.  This means that you will eventually recover some of your uninsured funds.  The FDIC declared a 50% advance dividend for uninsured deposits.To find out more about FDIC Deposit Insurance:

• Visit EDIE the FDIC’s Electronic Deposit Insurance Estimator
• View the FDIC Deposit Insurance Coverage Video

Checks that were drawn on IndyMac Bank, F.S.B. will be honored up to your available balance or the insured amount.  You may withdraw funds from any transferred account without an early withdrawal penalty until you enter into a new deposit agreement with IndyMac Federal Bank.  A hold may be in place on deposits accounts due to delinquent loans where the depositor is the borrower or guarantor.  Additionally, any account pledged as collateral for a loan will be held.Back to top

V.  Banking ServicesOn March 19, 2009 there was no break in services.As ofJuly 14, 2008 you may continue to use the services to which you previously had access, such as, online service, safe deposit boxes, night deposit boxes, wire services, etc.

Your checks will be processed as usual.  All outstanding checks will be paid against your available insured balance(s) as if no change had occurred.  IndyMac Federal Bank will contact you soon regarding any changes in the terms of your account.  If you have a problem with a merchant refusing to accept your check, please contact IndyMac Federal Bank, Customer Service Department, at 800-998-2900.  An account representative will clear up any confusion about the validity of your checks.

All interest accrued through Friday, will be paid at your same rate.  IndyMac Federal Bank will be reviewing rates and will provide further information soon.  You will be notified of any changes.

Your automatic direct deposit(s) and/or automatic withdrawal(s) will be transferred automatically to IndyMac Federal Bank.  If you have any questions or special requests, you may contact a representative of your assuming institution at 800-998-2900. Back to top

VI.  Loan Customers If you had a loan with IndyMac Bank, F.S.B., you should continue to make your payments as usual.  The terms of your loan will not change under the terms of the loan contract because they are contractually agreed to your promissory note with the failed institution.  Checks should be made payable as usual and sent to the same address until further notice.For all questions regarding new loans and the lending policies of IndyMac Federal Bank, please contact 800-998-2900 or visit the IndyMac Federal Bank website atwww.IndyMac.com. Back to top

VII.  Unclaimed Deposits Please note that any deposits that have not been claimed within 18 months of the failure of Indymac Bank was sent to the FDIC by One West Bank. If the FDIC is unable to locate the deposit customer, the unclaimed funds will eventually be escheated to the state or according to Federal Law (12 U.S.C., 1822(e)).

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VIII.  Possible Claims Against the Failed InstitutionDetermination of Insufficient Assets To Satisfy Claims Against Financial Institution in Receivership

SUMMARY: The FDIC, by its Board of Directors, has determined that insufficient assets exist in the receivership of IndyMac Bank, F.S.B., Pasadena, California and the receivership of IndyMac Federal Bank, FSB, Pasadena, California to make any distribution to general unsecured claims, and therefore such claims will recover nothing and have no value.

DATES: The Board made its determination on November 12, 2009.

FOR FURTHER INFORMATION CONTACT: If you have questions regarding this notice, contact Thomas P. Bolt, Counsel, Legal Division, (703) 562–2046 ortbolt@fdic.gov; Shane Kiernan, Senior Attorney, Legal Division, (703) 562–2632 or skiernan@fdic.gov,

SUPPLEMENTARY INFORMATION: On July 11, 2008, IndyMac Bank, F.S.B., Pasadena, California (‘‘IndyMac Bank’’) (FIN # 10007) was closed by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation (‘‘FDIC’’) was appointed as its receiver. In complying with its statutory duty to resolve the institution in the method that is least costly to the deposit insurance fund (see 12 U.S.C. 1823(c)(4)), the FDIC effected a pass-through receivership. Accordingly, the FDIC organized IndyMac Federal Bank, FSB, Pasadena, California (‘‘IndyMac Federal’’), a new federal savings bank for which the FDIC was appointed as conservator. IndyMac Bank’s assets were transferred to IndyMac Federal under an agreement whereby the amount (if any) realized from the final resolution of IndyMac Federal after payment in full of IndyMac Federal’s obligations was to be paid to the IndyMac Bank receivership. On March 19, 2009, IndyMac Federal was placed in receivership and substantially all of its assets were sold. The amount realized from the resolution of IndyMac Federal is insufficient to pay all of its liabilities, and therefore there will be no amount to pay to the IndyMac Bank receivership.Section 11(d)(11)(A) of the FDI Act, 12 U.S.C. 1821(d)(11)(A), sets forth the order of priority for distribution of amounts realized from the liquidation or other resolution of an insured depository institution to pay claims. Under the statutory order of priority, administrative expenses and deposit liabilities must be paid in full before any distribution may be made to general unsecured creditors or any lower priority claims. The FDIC has determined that the assets of IndyMac Bank are insufficient to make any distribution on general unsecured claims and therefore, such claims, asserted or unasserted, will recover nothing and have no value. The FDIC has also determined that the assets of IndyMac Federal are insufficient to make any distribution on general unsecured claims and therefore, such claims, asserted or unasserted, will recover nothing and have no value. //

Federal Register / Vol. 74, No. 221 / Wednesday, November 18, 2009 / Notices59541

FAQ re IndyMac “No Value” Determination Back to top

IX.  Priority of ClaimsIn accordance with Federal law, allowed claims will be paid, after administrative expenses, in the following order of priority:

Depositors

General Unsecured Creditors

Subordinated Debt

Stockholders

Back to top

X.  Dividend Information When IndyMac was placed into Conservatorship in July of 2008, the FDIC calculated that the ultimate resolution of IndyMac would result in a recovery of approximately 50% of the uninsured deposits of IndyMac. Based upon that estimate, an advance dividend in that amount was paid to the uninsured depositors at that time. The announced sale of IndyMac to IMB Management Holdings is consistent with the original estimate and no additional dividend will be paid as a consequence of this sale.While no dividends for the uninsured depositors are anticipated at this time, the FDIC will continue to periodically re-assess the financial condition of the receivership to determine if there is additional cash for dividend distributions.

Dividend History on IndyMac Bank, F.S.B.
JavaScript is disabled or blocked. Alternatively, you may navigate to
www2.fdic.gov/DIVWEB/Dividendindex.asp and search for the dividends. Dividend Information on Failed Financial Institutions Back to top

XI.  Brokered Deposits The FDIC offers a reference guide to deposit brokers acting as agents for their investor clientele.  This site outlines the FDIC’s policies and procedures that must be followed by deposit brokers when filing for pass-through insurance coverage on custodial accounts deposited in a failed FDIC Insured Institution.Deposit Broker Processing Guide

Sure, with enough firepower you can not only get a principal reduction but shut down the bank from even attempting to collect from you at all.

As far as regarding how you “get your principal reduction” in HAMP read on…

Remember folks, these changes to HAMP and HAFA and every other program rolled out require not only sign off at each of the various “banks” but also they are guidelines meant to encourage behavior.

You should drink eight glasses of water each day as well.  Do you follow that guideline?

Thus far we have seen no significant recourse for homeowners if the mortgage companies don’t obey these guidelines.   But let’s at least consider what they are proposing.

The new HAMP guidelines:

• “encourage principal write-downs”
• “are to be implemented in coming months”
• “requirement that servicers consider ‘principal relief’”
• “Borrowers faced with unemployment… will be able to have payments temporarily reduced to an affordable level for three to six months”
• “servicers must pursue early intervention”

Especially power is a REQUIREMENT to consider.  Tack on the MUST pursue early intervention.  i.e., MUST mail homeowners letting them know they need to take action or they will face foreclosure.    I’m sure we’re all encouraged about the “affordable” payments when you have no income due to loss of job.  I vote for $1 mortgage payments.

If you want to take down the bank, forcing them to offer you a significant loan modification or write-down in a short sale be prepared to fight and fight hard.  It is a winnable battle but suit up.

-          The Bank Slayer

Treasury Prepares Principal Reduction Initiative under HAMP

Posted By DIANA GOLOBAY On March 26, 2010 @ 8:00 am | 1 Comment

(Update 1: adds Treasury announcement.)

The US Treasury Department, as it continues to revamp the Home Affordable Modification Program (HAMP), announced today an initiative to encourage principal write-downs.

The principal reduction plan is one of the changes to HAMP, to be implemented in coming months.

The changes will encourage servicers to write-down a portion of mortgage debt as part of a HAMP modification, allow more borrowers to qualify for modification and help borrowers move into more affordable housing when modification is not possible, according to a fact sheet on the improvements provided to HousingWire.

Most notable among the new initiatives is the requirement that servicers consider “principal relief” including write-downs.

“This alternative modification approach will include incentive payments for each dollar of principal write-down by servicers and investors,” Treasury said in a statement today. “The principal reduction and the incentives will be earned by the borrower and lender based on a pay-for-success structure.”

The principal reduction initiative is geared toward borrowers with excessive negative equity.

The write-downs will apply only to borrowers with 115% or higher loan-to-value (LTV) ratios. Servicers will initially forbear some or all of the balance exceeding 100% of the home’s value, down to a 31% debt-to-income ratio. Then, the servicer will forgive the forborne amount in three equal installments over three years, contingent on the borrower’s ability to remain current on payments.

Borrowers faced with unemployment – therefore, a lack of income to calculate the debt-to-income ratio targeted under HAMP – will be able to have payments temporarily reduced to an affordable level for three to six months. Treasury is also clarifying borrower outreach and communication requirements, increasing incentives available to servicers and extending those incentives to borrowers with mortgages insured by the Federal Housing Administration (FHA).

The Treasury also announced adjustments to FHA programs that will provide more refinancing options to borrowers with negative equity due to large local declines in home prices. The new FHA loan should re-equify the borrower by reducing the amount owed on the original loan by at least 10% and resulting in a principal amount less than the home value. After refinance, the combined first mortgage and any secondary liens cannot surpass 115% of the current value of the home.

“This refinancing will help homeowners by setting monthly payments at affordable levels and decreasing the mortgage burden for families owing significantly more than their homes are worth,” Treasury said. “Keeping more responsible families in their homes should support the continued recovery of the housing market.”

For borrowers that cannot complete a modification, there’s the Home Affordable Foreclosure Alternatives (HAFA) program, which ends in a short sale. Treasury said today it will double relocation assistance payments to borrowers that elect HAFA, as well as increase incentives for servicers and lenders in order to increase participation in this program.

Laurie Maggiano, Director of Policy in the Office of Homeownership Preservation at the Treasury, indicated yesterday during a Webinar ^[1] hosted by HousingWire that a significant announcement around HAFA was in the works.

The Treasury yesterday announced sweeping improvements ^[2] to the way servicers actively solicit borrowers for participation in HAMP, even from the protection of bankruptcy. Beginning June 1st, servicers must pursue early intervention, pre-screening every borrower that misses two or more payments to determine eligibility for HAMP and soliciting those qualifying borrowers for HAMP participation.

The news of a HAMP principal reduction program comes after Bank of America (BAC ^[3]: 17.90 +0.90%) introduced this week ^[4] an earned principal forgiveness program in which a forborne amount of principal will gradually be forgiven over a five-year period.

Analyst commentary on the program suggests it bears adverse implications ^[5] for the payout of certain non-agency mortgage-backed securities (MBS). In particular, the program presents a “clear negative” for junior mezzanine and subordinate debt holders, as well as moral hazard risk as borrowers intentionally default to receive principal forgiveness.

For homeowners the choice is VERY CLEAR; short sales do less damage to credit, allow the homeowner to satisfy a large portion of the debt and in many cases allow for the homeowner (who has fallen behind on payments) to live “rent free” while the sale is negotiated.

The following article on CNNMoney highlights what hopefully is a positive trend in lenders considering short sales not only as a better alternative to foreclosures but reducing the time it takes for a short sale to be approved.   As a side note, I take issue with the Equator “software guy” as his system has flaws and is an obstacle versus a helpful tool at the homeowner level (at least right now).

- The Bank Slayer

Don’t foreclose! Do a short sale

NEW YORK (CNNMoney.com) — Short sales are the hottest thing going in the distressed-property market, and the trend is expected to get even hotter in coming weeks, when the government starts handing out cash to encourage lenders to close these deals.

“Banks have ramped up short sale approvals,” said Duane Legate of House Buyer Network, which connects short sellers with buyers. “They’re hiring a lot of the people who once worked in the mortgage-lending industry and moved them over to short sales.”

These transactions, where lenders allow homeowners to sell their houses for less than they owe, accounted for 17% of all residential real estate sales in February, up from nearly 13% in November, according to a monthly real estate market survey by Campbell/Inside Mortgage Finance.

And Bank of America (BAC, Fortune 500), the country’s largest mortgage servicer, has more than doubled the number of short sales it processed in recent months.

Elizabeth Weintraub, a Sacramento, Calif.-area real estate agent who handles many short sales, was amazed at how quickly a recent deal went through. “Bank of America approved it in 24 days,” she said. “That flipped me out.”

This is a huge change from even just six months ago when the short-sale market was stalled and most people would describe the process has real estate hell. Because lenders stand to lose so much on these transactions, they have been reluctant to make short sales happen, often waiting months before getting back to potential buyers.

Beware: You lost your house but still have to pay

In the past, many short sales would never come to fruition and the ones that did averaged over half a year to complete,” said Chris Saitta, CEO of Equator, which produces short sale software.

“Things would just fall into a black hole and not come out again,” added Weintraub.

And even when banks did agree to the sale, the process could be further complicated if the original owner had a second mortgage.

In most cases, the first lender is repaid in full before any money flows to a second-lein holder. And because most distressed borrowers are severely underwater, there’s usually nothing left to send on. As a result, second-lein holders are left holding the bag and have been killing many deals.

But that has been changing. For one thing, banks realize that they make out far better financially with a short sale than a foreclosure. “The lenders lose 50% on a foreclosure and only 30% on a short sale,” said Glenn Kelman, founder of the real estate Web site Redfin. “And short sales offer a way to get distressed properties off their books quickly.”

And on April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing.

Under the new Home Affordable Foreclosure Alternatives program, borrowers will earn a $3,000 “relocation incentive” and servicers will get $1,500 for handling a short sale.

The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims.

Lenders participating in the program must also determine the market values of properties early on and inform the owners of just what price they’re willing to accept. Then, if owners come back to the lenders with bonafide offers, they have to be accepted within 10 days.

Equator’s Saiita anticipates a short sale explosion in response to the new program. “The challenge will be handling all the volume,” he said.

The company has already tweaked its software, which 58 servicers use, to handle the new HAFA rules. And that should help reduce the time it takes to execute a sale, which currently averages 88 days.

The boom in short sales may accelerate the end to the foreclosure crisis by cleaning out the overhang of borrowers in distress and replacing them with more stable homeowners.

Plus, these sales are better for distressed borrowers because their credit scores suffer less. Going through a foreclosure can knock 200 points off a FICO score, twice as much as the penalty for a short sale.

By Les Christie, staff writer – March 29, 2010: 3:46 AM ET

When are they going to roll out the HEMP program so we can relax while being put through the agony of re-faxing 90 pages of paperwork over and over and over.   You asked for a new and improved HAMP and so now you get HAFA…say it with me now, HAFA, no, no, no, pronounced just like “half a” program.  See I knew you could do it.

Here is a summary:

HAFA – New Program Offers Borrowers Foreclosure Alternatives

Introduction of Home Affordable Foreclosure Alternatives – Short Sale and Deed-in-Lieu of Foreclosure

Overview

Supplemental Directive 09-09 provides guidance to servicers on the Home Affordable Foreclosure Alternatives Program (HAFA) and includes the general terms and conditions, evaluation process, documentation, and reporting requirements. As part of the Home Affordable Modification Program (HAMP), HAFA provides financial incentives to servicers and borrowers who utilize a short sale or a deed-in-lieu (DIL) to avoid foreclosure on a HAMP-eligible loan.

Foreclosure Alternatives

The HAFA program simplifies and streamlines the use of short sale and DIL options by incorporating the following unique features:

• Complements HAMP by providing viable alternatives for borrowers who are HAMP eligible.
• Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis.
• Allows the borrower to receive pre-approved short sale terms prior to the property listing.
• Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement.
• Requires that borrowers be fully released from future liability for the debt.
• Provides financial incentives to borrowers, servicers, and investors.

Timing & Eligibility

Servicers – Supplemental Directive 09-09 is effective April 5, 2010, but participating servicers may elect to implement HAFA prior to April 5, 2010, in accordance with the Supplemental Directive. In order to participate in HAFA, a servicer must have executed a HAMP Servicer Participation Agreement (SPA) by December 31, 2009. (The HAMP SPA is available for review on HMPadmin.com.)

Borrowers – Servicers must consider a HAMP-eligible borrower for HAFA in accordance with their policies within 30 calendar days of the date the borrower:

• Does not qualify for a HAMP Trial Period Plan,
• Does not successfully complete a HAMP Trial Period Plan,
• Is delinquent on a HAMP modification by missing at least two consecutive payments, or
• Requests a short sale or DIL.

Note: A borrower must be considered for a HAMP modification and other retention programs offered by the servicer prior to being considered for HAFA.

If you are trying to save your family from a foreclosure situation call our office now at 713-595-8200.

– The Bank Slayer

One of the fears that homeowner have is whether they will be able to secure a new loan to purchase a home in the future after short selling the current one.  The answer is yes.  In fact, the Department of Housing and Urban Development (HUD) released a letter to lenders regarding borrower eligibility for a new Federal Housing Administration (FHA) mortgage after pursuing a short sale.

According to the letter (available to download here) and effective immediately, while borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement specifically “to take advantage of declining market conditions” or “to purchase another property at a reduced price”; they are cleared for a new FHA-insured mortgage if they were current on their previous mortgage and other debts at the time of the short sale and if the proceeds from the short sale served as payment in full.  These points are KEY!!!

Realtors, take note…if your seller needs to pursue a short sale and is still current, the sale will need to be handled differently than if they are in default.   Example, If a borrower executes a short sale while in default on their mortgage they will not be eligible for a FHA-insured mortgage for three years from the date of the pre-foreclosure sale.   But some lenders will make exceptions if the default was due to circumstances beyond the borrower’s control such as the death of the primary wage earner.  But this needs to be documented and handled diligently during the transaction.

It also means that anyone eligible for the Home Affordable Foreclosure Alternatives program (HAFA) would not be eligible for a new FHA-insured mortgage for three years.  Thanks to Jon Prior at HousingWire for this timely info.

-          The Bank Slayer