HAFA Meeting Update

Yesterday I sat through a HAFA Update meeting with representatives from the US Treasury and the staff of Arizona Association of Realtors. The Treasury staffers are on tour of five hardest hit states, and are meeting with the local Realtor associations to get feedback on the program and to answer questions.

As I have stated elsewhere, I have been a HAFA believer ever since my friend and colleague Ray Mathoda (of AssetPlan USA) helped me to wrap my mind around the intent of the program. The intent is indeed good, but the devil, as they say, is in the execution. Undeniably there are issues with execution, but the purpose of this post is not to replay the sad song that you hear all over the internet, but to post my personal takeaways on the meeting. Here they are:

1. Whether or not the program is successful, one of the intentions for it was to lead the industry by example, and we are already seeing results of this. Full forgiveness of deficiency on 1st loan balance is much more commonplace than it was before HAFA (this is a requirement for HAFA transactions).
2. The "trust issue" is still a huge factor to overcome. The distressed borrowers do not trust the lenders, and they do not trust the government, instead choosing to trust the real estate professionals or attorneys (who will represent them exclusively). This makes any kind of public outreach difficult, since a message coming from the lender or the government is not perceived to be as credible, and the real estate agent or an attorney cannot get the contact information of the distressed borrower due to privacy reasons. Be on the lookout for a new PSA campaign from the Treasury this summer.
3. The borrower who is going through the HAFA program has the right to escalate their file if they believe that the servicer is not adhering to program guidelines. This can be done by calling 1-888-995-HOPE and asking for MHA Help Line (call center is actually in Peoria, AZ). The agent also has ways to escalate, as seen on the HMPAdmin.com website. Email is generally more effective. The Treasury is actively enforcing the program guidelines, and is following up on each complaint submitted through the proper channels.
4. Valuation reconciliation (valuation dispute) procedures is a common source of frustration, and they are evaluating the creation of a standard procedure for it, which would allow the agent and the borrower to dispute the value presented by the servicers and ask for a correction (provided that they can show support).
5. If the borrower's house is listed, and they submit the documentation for a HAFA short sale after they receive the offer (what is call the reactive vs the proactive approach), they do not have to be delinquent on their payments, so long as they can prove "imminent default."

In conclusion, I appreciate the work that has been put into this program thus far, and can say that we try to qualify each distressed seller that comes our way for HAFA first, before attempting a proprietary program from the servicer. In the end, I do not believe that HAFA is going to be the final solution to the short sale dilemma, but I do believe that the impact of it will remain felt, and that in the end it will be remembered as a good thing and a benefit for the distressed borrowers who need to short sell their house.

You can read more about the program here.