The upcoming Real Estate/Mortgage “issues” looming are no secret – especially in our Arizona market. I wanted to touch base with you on two interesting developments that indicate a potential shift in the market and how we are going to deal with the negative equity situation that we have all come to know so well.

A New Trend?

Yesterday’s article in the Arizona Republic entitled “Bank of America to lower mortgage principal” explained a program from B of A that is designed to cut principal balances. Unlike loan mods which are…well we all know what they are, this program seeks to reduce the balance of a borrowers loan. While this program is not open to all upside homeowners, it has created some curiosity as to whether or not this might be the beginning of a new trend. While most lenders are not jumping on this band wagon today, we all know that this is where the real “help” would be for homeowners. Lowering the rate or stretching out the amortization period on a loan that is significantly upside down does little more than delay the inevitable. Here is a link to the article for your reading pleasure ;). Please take a moment to read, this is a very interesting piece.

In addition, another article was released stating that the Treasury Department is very interested in Bank of America’s new program. This could be the beginning of a new trend or way of thinking and I wanted to make you aware of what’s brewing out there. With all of the political pressure and the undeniable statistics outlining what lies ahead the government is seeking some sort of resolution. I will be sure to keep you posted.

HAFA

HAFA was introduced in 2009 by the Treasury (revised March 12th, 2010) and it goes into effect on April 5, 2010. Essentially the program provides a set of guidelines and timeframes along with financial incentives for short sale transactions. I have attached a copy of the HAFA agreement letter for your review. It contains all of the guidelines and timeframes associated with the program. Please take a few minutes to read. This will be a big part of our market going forward. Some of the highlights include:

1. Servicers participating in HAMP are required to cooperate with HAFA guides – list of servicers participating in HAMP HAMP Servicers

2. Provides Pre-Approved Short Sale Terms (including minimum acceptable net proceeds to the servicer)

3. Requires Banks respond to offers within 10 days

4. Requires borrower be fully released from future liability for the 1st mortgage (no deficiency judgment allowed on forgiven sum) *this does not refer to possible tax liability

5. Provides $1,500 for “relocation assistance” to seller – basically helps pay for moving costs etc… - paid at closing through Title

6. HAFA program expires 120 calendar days after borrower receives letter (unless extended by servicer)

7. Provides up to 3% not to exceed $3,000 total to pay off subordinate liens (HELOC’s, HOA liens etc…)

8. Under HAFA agreement home cannot be sold to family, friends or co-workers – must be an arm’s length transaction

9. Real Estate Agent can NOT earn a commission if you sell your own home under the HAFA agreement

10. If the home does not sell by the end of the HAFA agreement the homeowner must convey ownership to the Servicer via Deed in Lieu of Foreclosure. In this scenario the homeowner would still receive the $1500 for “relocation assistance”

Please let me know if you have any questions.

Your Trusted Advisor,

Jeremy House, CMPS
602.435.2149 – business hours/weekends/evenings
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