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Why HAFA Short Sales Don’t Work for Nevada
Like passengers on the Titanic, homeowners who decide to try HAFA, sit and wait for help that never comes, or comes too late. The days of trusting your local neighborhood banker are long gone.
One year ago, the U.S. Treasury Department initiated a federal program known as HAFA (Home Affordable Foreclosure Assistance Program.) While the HAFA program was created to simplify the short sale process, it is now common knowledge that HAFA has turned out to be an even bigger failure than previous government assistance programs such as HAMP, HOPE NOW and the Making Homes Affordable Programs.
Nevada homeowners need help. Three out of four Nevada homeowners are upside down in their mortgage and Nevada remains the number one foreclosure state in the nation. While many Nevada homeowners have tried to get their loans modified through various government assistance programs such as the Home Affordable Mortgage Plan (HAMP), the majority of these modification requests have been denied. The few who have been lucky enough to receive modifications received what are called “trial modifications”
Additionally, the House voted last month to eliminate the HAMP mortgage relief program which the Obama administration established nearly two years ago to help homeowners avoid foreclosure.
One of the reasons the House voted to eliminate the mortgage relief program is due to the fact that these programs (HAMP, HAFA, etc.) have been misleading and have actually harmed homeowners. According to Bill Myers, Nevada Short Sale Expert and Owner of The Myers Team with the Caliber Realty Group, “The HAMP and HAFA programs have been a disaster for Nevada homeowners. Many families applied for government mortgage relief believing that they could stop the foreclosure process and keep their homes. Unfortunately, the majority of these applicants did not understand the approval criteria and as a result, wasted many months ultimately losing their homes to foreclosure.”
So why do some people still believe in HAFA? According to Myers, “Banks are taking advantage of homeowners who are in trouble by failing to explain the truth about HAFA.” The problem with HAFA is that it is a voluntary program and banks are not required to participate. Banks are quick to tell homeowners that they will participate with the HAFA program; however, this is extremely misleading since most banks do not own your loan. They are simply servicing your loan for a third party investor, who may have no interest in HAFA.
Even though you may have walked into a Wells Fargo or a JP Morgan office to apply for a home loan, the fact remains that up to 90% of home loans are packaged and sold to investors. When a loan is sold, the bank will typically continue to service your account. Banks get paid a monthly servicing fee by each investor to perform various duties (such as collecting mortgage payments and sending out monthly mortgage statements) however; the money you borrowed to purchase your home likely came from an investor, not from a bank. Banks are essentially the middle-man, and make their money by servicing millions of residential mortgages. Myers said, “The banks have no incentive to approve your short sale or expedite the process due to the fact that the money you borrowed came from a third party investor (i.e. Fannie Mae, Freddy Mac, FHA, VA, Ginnie Mae, AIG, etc.) Since the investors are paying banks a monthly fee to service each residential mortgage, what is the banks incentive to expedite the process?” Once your short sale is approved, the file is closed and the bank no longer receives the monthly servicing fee for your account. Myers says, “Banks are debt collectors. The longer and more difficult they are able to make the short sale process, the more money they make from the investor. This is why banks recommend HAFA. They are looking out for their best interest, not yours. Like the Wells Fargo stage coach, the days of trusting your local neighborhood banker are long gone.”
To make matters worse, banks call homeowners and promise incentives to participate with HAFA, such as offering up to $3000 cash back to HAFA participants. Additionally, banks promise that the deficiency will be waived. Myers says, “Banks are telling distressed homeowners everything they want to hear, however, they are failing to deliver on their promises.” What is the banks motivation for doing this? It’s simple. If the bank is able to stretch out the foreclosure process an extra 3-4 months, then they make 3-4 months of additional profit by collecting the servicing fees from the investor, however, applying for HAFA does not stop the foreclosure process. Many homeowners apply for HAFA, thinking they are doing the right thing, however, after waiting 4-5 months; they are informed by their bank that their HAFA request has been denied. Then, the homeowner is told by their bank that they can “try and do a traditional short sale, however, the auction date is less than 30 days away.” Like passengers on the Titanic, homeowners who decide to try HAFA sit and wait for help that never comes, or comes too late. Banks know that the majority of Nevada residents do not qualify for HAFA; however, they still recommend HAFA to borrowers so that they can collect as much money as possible until the home forecloses.
According to the Lied Institute for Real Estate Studies at University of Nevada, Las Vegas, “Most homeowners in Las Vegas are so far upside down on their homes (owing significantly more than their home is worth) that they don't qualify for the government's $75 billion mortgage assistance plan.” It is estimated that less than one percent of all Nevada residents actually qualify for government assistance programs like HAMP and HAFA.
It is understandable that many families have been misled by the HAFA program. Who wouldn’t want $3000 cash back or the promise of deficiency action waived? What can a distressed homeowner do to protect themselves? According to Myers, “The short sale process is really the best option for Nevada homeowners, however, it’s important not to be misled by HAFA and to work with a Realtor who is experienced with short sales and understands the approval process.” Additionally, Myers said, “Many Realtors have no idea how to negotiate a short sale and are actually harming their clients. They do not understand the difference between the servicer (bank) and the investor. As a result, many Realtors waste months calling banks for weekly updates or by uploading documents into the banks Equator system. Each day wasted places a seller closer to foreclosure. Dealing with banks who are not motivated to help you and who do not own your loan makes no sense. Uploading paperwork into cyberspace is not negotiation. If your Realtor is not in direct communication with the actual investor of your loan, then it is unlikely they will get results.”
A short sale (also called a Short Payoff) allows a homeowner to sell their home at current market value. Investors prefer short sales because they represent less loss than foreclosure.
According to Myers, “There is no easy way to solve the Nevada housing crisis; however, a non-HAFA short sale seems the best and safest choice for a Nevada homeowner facing financial hardship. Surrendering a home worth half of what you owe is NOT a failure; it's a business decision.
In 2010, the Myers Team sold more short sale listings than any Realtor or Broker in Nevada.
For additional information, please visit http://www.nevadashortsaleinfo.com/-----
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Bill and Francoise Myers, owners of The Myers Team with the Caliber Realty Group have sold more short sale listings than any Realtor or Broker in Nevada. They are nationally recognized as one of the most influential figures in real estate today.
Page Updated Last on: May 10, 2011