The short sale market is so appealing, even the federal government has gotten into the game. But local agents say Uncle Sam’s involvement is creating more headaches than home sales.
The Home Affordable Foreclosure Alternatives Program (HAFA) took effect in April, along with its better-known cousin, the Home Affordable Modification Program (HAMP).
The goal of HAMP is to encourage loan modifications for those looking to stay in their homes long-term. HAFA, alternatively, offers incentives to banks in exchange for approving short sales for certain homeowners who don’t want, or aren’t able, to stay in their homes.
But agents and brokers say that despite its built-in advantages, the HAFA program is unwieldy and difficult to work with. Timelines often go unmet, and different banks are interpreting government guidelines are different, making it difficult to advise homeowner clients on whether it’s worth applying for the program, sources told Banker & Tradesman.
“I don’t think the HAFA is working. I don’t think the HAMP is working,” said Marie Cashman, broker/owner of Neves & Cashman Realty in New Bedford. “I think they’ve got to take another look at this, because I don’t think this is helping anybody.”
Not Fine-Tuned
HAFA offers up to $2,000 in lender reimbursements for each approved sale, and up to $3,000 for qualifying homeowners to cover moving expenses once that sale is finalized – if they qualify.
But qualification is no simple matter. Just as with a HAMP modification, buyers have to meet stringent income and affordability guidelines to qualify, and banks seem to be interpreting those guidelines differently.
“We’ve had some cases where we’ve thought people would qualify [for HAFA]… and the bank comes back and says, ‘listen, we pulled their credit and they have two luxury cars, so they don’t get it,’” said Anthony Lamacchia of Lamachia McGeough Realty in Waltham, a brokerage specializing in short sales. “The jury’s still out on how many people the banks are going to qualify for HAFA. My initial interpretation is, not as many… as I hoped or thought.”
If a customer has already attempted a HAMP modification and had it fall through, they are supposed to be pre-qualified for HAFA. But many homeowners who think they may be qualified aren’t. While they may have inquired about receiving a modification or solicited an application, their financials oftentimes hadn’t been fully evaluated, or they never actually tried to make a trial modification work. In these cases, the evaluation process starts all over again when seeking a HAFA short sale.
The law calls for the HAFA evaluation process to take a maximum of 10 days, but many real estate agents said it can regularly take weeks before they receive an answer, and those delays costs more than time.
Homes must remain owner-occupied throughout the qualification and marketing processes – inconvenient, at best, given that the majority of those seeking a short sale can either no longer afford the home or need to move quickly to attend to other business.
“It’s taking at least an additional 30 days just to get it through the HAFA system,” Cashman said. “I don’t think that they have the system fine-tuned.”
“Treasury remains in close communication with mortgage servicers and other important partners in the industry regarding implementation of the HAFA Program. We are aware of the issues these partners have raised and are considering slight changes to the program,” said U.S. Treasury spokeswoman Andrea Risotto in an e-mail to Banker & Tradesman. Risotto declined to elaborate on what changes the Treasury Department, which oversees HAFA, is considering. “We remain committed to ensuring strong implementation of HAFA and other programs under Making Home Affordable.”
Hard Work Isn’t Working
Meanwhile, turnaround times on non-HAFA short sales seem to be improving.
“Before, we were looking at a minimum of six months to get things to go through,” on non-HAFA sales, said Rick Coughlin, broker/owner of Coughlin & Co. Real Estate in Weymouth. “Now, we’re looking at under three months, and in some cases much quicker.”
With lots of supply on the market and lots of buyers all too ready to jump ship if a deal suffers long delays, struggling homeowners may be discouraged from applying for HAFA at all, potentially losing out on valuable relocation incentives.
Agents are mixed on whether bank processing time will improve. Though banks have been willing to listen to agent concerns, change has been slow to filter from boardrooms onto the street.
“I think that might be [because of] operational issues that the banks are having, because I know they’re working hard,” said Lamacchia. “There’s no question.”
Cashman attended a meeting at U.S. Rep. Barney Frank’s New Bedford office more than a month ago with representatives of Bank of America and Wells Fargo, where she raised concerns of short sale processing. So far, she said she’s noticed little improvement.
“You can understand the volume that they have, but I don’t think that they’ve responded quickly enough to address these problems,” she said. “My solution for the unemployment problem is to put these people to work negotiating short sales.”
