Effective April 14^th, 2012  the following changes will be made to the Bank of America short sale process: 

Five documents will be required to be submitted with a short sale offer

1.  Purchase Contract including Buyer’s Acknowledgement and Disclosure
2. HUD-1
3. IRS Form 4506-T
4. Bank of America Short Sale Addendum
5. Bank of America Third-Party Authorization Form 

Time frames for counteroffers will be reduced to 5 days from the current 14 days. Only two counteroffers will be entertained.  Responses will be given within 3 days.

 BIG NEWS for upside down homeowners!

           Two big developments impacting the real estate market in general, and upside down homeowners specifically, have recently been announced.   The very popular HAFA program, which releases eligible homeowners of all deficiency in a short sale and can give $3,000.00 to sellers at closing, as of June 1, 2012 is relaxing  some of the rigid standards to qualify for the program. This will now allow hundreds of thousands of homeowners who were ineligible to now participate. HAFA under the new guidelines will now allow homeowners to be current in their payments, and to not occupy the home in question and still be eligible.  The two biggest concerns potential short sellers have are now being addressed:  release from deficiency (this was already a HAFA perk)  and now the elimination of the requirement to become late in their payments to  qualify for HAFA.

             The second big assistance for upside down homeowners is expansion of the HARP refinance program which now allows eligible homeowners to refinance their loans at today’s historically low interest rates even if they are upside down in their homes.  Previously if you did not have enough equity in your home you could not refinance.

             Do not forget the looming deadline of December 31, 2012 to be exempt from income tax on the amount forgiven for qualified homeowners.  For example: If you are $100,000   upside down this could save you between $20,000 and $28,000 in income tax liability. Remember, in most instances income tax debt  is not includable in a bankruptcy.  As of this writing there has been no talk of extending this deadline.

             If you have questions concerning either program as well a traditional home you want to sell call me for a free consultation regarding your personal situation. 

Karen R. Spell, Esq

Karen R. Spell, P.A

407-306-0454

Karen@karenrspellpa.com

www.myshortsalerescue.com

In the past 3 years I have successfully negotiated and closed hundreds of Short Sales.  Over the course of this time I have learned several things which if you are embarking on the short sale process you should know.

There is a lot of misinformation out there regarding short sales, the process and the consequences both to ones credit and the taxes owed resulting from the transaction.  Short sale negotiation is definitely not one of the cases where you get what you pay for.  Make sure you align yourself with short sale experts from the listing realtor, to the negotiation specialist to the closing agent.  Each stage of the process requires knowledge and expertise to help achieve a satisfactory result for you *

Most of the people that I negotiate short sales for are not “bad” people.  That is they are not people who bought homes they could never hope to afford with financing they did not deserve under terms that were outrageous.  Most of the people that I encounter were sucked into the black hole of today’s economy.  These are hard working people who pay their bills, have good credit and are responsible members of the community.  People who through no fault of their own find themselves upside down in  homes  they can no longer afford to keep.   I cannot tell you how many people come to me in tears regarding their situation not knowing where to turn for answers.*

Yes banks make unsound business decisions concerning short sales every day.  Case in point: a homeowner received a short sale offer of $300,000.00 (cash I might add).  the bank in questions refused the offer and later foreclosed on the home and sold it for $203,000.00 to the same party who had made the $300,000.00 offer.  Another case in point: a homeowner asked the bank, which held a third mortgage on her home to consider releasing her home from the third mortgage so she could short sale the home. The third mortgage refused to release the property and later foreclosed on the home.  The third mortgage holder now owns the home worth approximately $150,000.00  and they owe the first and second mortgage holders $369,000.00+ which must be satisfied or negotiated down in order for them to be able to sell the property.  Another case occurred when the bank was foreclosing and the homeowners father agreed to payoff the mortgage in order to save his sons credit.  As the foreclosure process had been started it was necessary to contact the bank’s attorneys in order to obtain a payoff letter.  When the payoff was received it contained $11,000.00 in attorney fees and costs.  The father agreed to payoff the mortgage of approximately $250,000 (even though the home was only worth $150,000) but not the attorney fees.  The attorneys said no.  When the father called the bank directly they referred him back to the attorneys. He did not payoff the loan and the bank foreclosed.  The bottom line here is obviously no one with responsibility for the banks bottom line was making these decisions.  It is imperative in short sale negotiations to get to the responsible party.  This is easier said than done as banks are cloaked in several layers of personnel.  Just try calling the 1-800 number for any bank and asking for the CEO.*

The HAFA or Home Affordable Foreclosure Act is intended to offer alternatives to fore closure such as short sales and Deed in Lieu of Foreclosure when a loan modification is not applicable.  Note: See my website for a discussion of these options.  

 The new directive takes effect 2/1/11, but it should be noted that it changes may be implemented immediately.  Addressed in the new directive are the following

Vacant Property

Currently a property to be eligible for HAFA must be the borrower’s primary residence.  Now as long as the home has been rented or vacant for not more than 1 year *prior to the effective date of a short sale or Deed in Lieu agreement will be HAFA acceptable.  The borrower must prove that  the home was their principal residence before relocating and that they have not purchased a new home in the year* prior to the short sale or deed in lieu agreement.  There is not a requirement of job pr transfer of job as a reason for moving.  The lender no longer has to check distance moved from prior home. *Previously was 90 days.

Release of Subordinate Liens

 There is no longer a six percent cap on payment to subordinate lien holders.

Monthly Gross Income

 Only hardship and not monthly income has to be checked to qualify for HAFA 2011.  Lenders may still require financial information from the borrowers for evaluation purposes

Short Sale Approval Response Times

A response must be given within 30 days of borrowers request for HAFA assistance or from solicitation by the lender to the borrower for HAFA assistance. Accepted or declined.
Commission for Realtors

The commission paid will be up to 6 percent as per the listing agreement. 

Retroactivity

If a borrower has been declined for HAFA it is not required to reevaluate them for HAFA under the new directives, however at their option a lender may do so

In reality while these changes should positively affect most HAFA applications HAFA still is not applicable to first mortgages held by Fannie Mae or Freddie Mac, or government backed loans such as VA, FHA or USDA loans for “rural areas.  As these loans in most areas account for up to 80% off all loans and up to 95% of all loans during the boom years from 2004 – 2007, the period in which most homeowners are “upside down” in value, HAFA will continue to have a limited positive impact  on the current reality of today’s distressed homeowner.

This is a summary only of the HAFA changes effective 2/1/2011