In Closing...

HAFA Will Work – and These Changes Will Help

Just after the State of the Union address by President Obama, amid all the other criticisms and commentary about Obama’s line about “winning our future,” the news reports seemed to hone in on the problems in the HAFA program. While I freely admit that the program is not without its faults, I do believe HAFA provides our best chance at turning around the housing market. We’re nowhere near the end of the housing market dilemma. I foresee another five years of digging ourselves out of the housing mess we’re in, both in Ohio and around the country. However, on December 28, 2010, major changes to the HAFA program were put in place that will work to help more homeowners and lenders reach workable solutions.

You can read a great article about all of the changes here. I feel the best changes – the ones that are most likely to positively impact homeowners – are:

1. The removal of the monthly gross income requirement, which will allow millions more to become eligible. I frequently receive calls from people who have had two incomes, but one of them loses their job. The remaining bread winner for the family still makes more monthly income than the 31% threshold previously required by the HAFA program, but with a second mortgage, school loans and other monthly payments, the debt is still too high to keep them current on all their bills. This change will make HAFA available for so many more people.
2. Retroactivity. Although not required, if a person had previously been denied for HAFA, this directive asks the lender to please re-evaluate them after the removal of the 31% income requirement. More importantly, each lender must provide, in writing, a policy describing the basis on which the servicer will re-evaluate the homeowner’s eligibility for HAFA.
3. Timing. Currently, most short sales take months to get a response from the lender, and it can even take up to a year. The problem is that the service of the loan is seeking approval from the investor. Sometimes, these are private investors in China that purchased the loan through those “mortgage backed securities” we heard so much about during the economic meltdown. We are actually calling China to see if they will approve a $150,000 short sale in Columbus Ohio! With the changes to HAFA, a third party servicer is given the power to make the decision on behalf of the investor and mortgage insurance provider. Under this new timing item, when a contract is submitted, the servicer is required to give an approval or denial within 30 days. This is huge news.

In closing –

HAFA will work. It is well thought out, and whomever is writing this stuff within the Obama Administration really understands the problems we face within this industry. They are trying to rectify it and are working to keep our neighborhoods viable. Plus, lenders realize that they can’t own every vacant house in a community after foreclosure and expect the value of those homes to increase. There are vacant “bank owned” properties on every corner of every community.  Simply put, foreclosures will continue to bringing down the value of all of our homes. Short Sales are the answer to cleaning out toxic mortgage people cannot afford while also putting real buyers into those homes today, thereby limiting the loss in values.

What’s more, we are hearing great news about Chase and other large lenders, hiring thousands of new staff. Rumor is that these new positions are in the Loss Mitigation departments and HAFA departments. There may be light at the end of the tunnel!

Scott Stevenson