Right feels left and left, right this morning, so my first HAFA point is that HAFA Requires the Deed in Lou Agreement as part of it’s so called wisdom and ordinary manner. This part of the process is passed over like the air conditioning feature in the new Ford Fiesta at the Vegas dealerships hot August clearance sale.
HAFA may require that the homeowner continues to pay up to 31% of their gross income to their senior lien holder. (Junior lien holders excluded). This means that once the distressed borrower applies and is awarded, they may have to resume payments on their mortgage.
HAFA makes no provision for securing any agreements with junior lien holders or judgment debt holders as part of their preapproval short sale program. This means that if the homeowner does not have a professional Realtor following them through the HAMP process and pre-negotiate their junior liens prior to the HAFA application, their exist some predetermined sticky wickets that are natural barriers to the closing steps. A large percentage of these sales will fall out and these distressed homeowners will for in all intensive purposes be placed on the streets.
It also requires the signed authorization and agreement for the deed in Lou of foreclosure which can be activated if they miss a payment provision. Under ordinary circumstances, these distressed homeowners can stay in their home for an additional 90 plus 21 days if the lender foreclosed under the traditional Notice of Default and Trustee Sale process. It is kind of like saying, “hey distressed homeowner, rather than you staying in your home with no payment under the traditional short sale process without your being able to continue to stay throughout the traditional foreclosure process, we will allow you the opportunity to suffer a myriad of red tape, forms and deadlines for your reinstating some form of payments and agreeing that if you miss one of these payments, you will turn over your deed and vacate the premises immediately”
Further, “In exchange for all this hassle, we will divert your first lien holder’s ability to go after you in the future for any deficiency judgment right they may have under the traditional short pay process, however, you are on your own with regard to junior lien holders”
Short Sales are in fact no different than a traditional sale with the exception that the property is financially upside down and the sale must be subject to the Sellers lender to approve the debt imbalance. Everything else about these sales are no different, The Seller is still obligated to disclose defects to the buyer and the buyer is still on notice to and should have the opportunity to investigate the condition of the property. The ‘blood on the street’ rule need more apply as we must add the factors which expose both the greedy and unethical. Legal and ethical challenges ensue as the brokerage industry navigates through the potential deficiency possibilities distressed homeowners may face which can easily allow brokers to be more culpable in cross complaints; both negligence and misrepresentation.
I state in many of my Short Sale Seminars, articles and consulting to Realtors nationwide, to invest in the education necessary to circumvent these stop gaps from happening to their prospects and Clients before the process begins. Many legal soothsayers, perhaps along with myself are predicting another new potential litigation wave against the real estate industry and brokerages as a result of what these distressed homeowners may state was “so called, our professional advice: in helping them with these timely short sale mitigation options. The fact is real estate brokerages pay dearly for expensive E&O (Errors and Omissions) insurance policies and appear to be the only ‘deep pocket’ left above ground after a real estate sale transaction has closed escrow. Most Plaintiff Attorneys know that when it comes to the average value of a nuisance claim is within the grasp of the Brokerages deductable of their E&O policy, they will usually be encourages to settle the case without admitting to any guilt.
Real Estate Agents may now register for a Short Sale and HAFA coaching program that offers both ‘Skyrocketing Income’ measures and Risk Management consulting. Contact Bryan Ridgley at bkr@pacbell.net for more information and to “Jumpstart” your bank deposits!
Bryan Ridgley
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