Like many professionals in the distressed property arena, I was genuinely excited with the federal government’s roll out last year of the HAFA short sale program. Since the real estate meltdown began in 2007, those of us advising potential short sale candidates experienced growing frustration with the interminable delays of most lenders in processing “traditional” short sale requests. Too often, those delays translated into lost
buyers, understandably unwilling to “hang in there” indefinitely while overwhelmed lenders dithered.
The HAFA program’s structure seemed clearly directed at this core program. By putting the lender approval process at the front of end of the short sale process, sellers and their agents would be able to market properties as “pre-approved,” thus creating transparency and predictability for interested buyers. And in fact, initial experience with the program seemed to warrant guarded optimism that we were finally on the road to smoother processing of the growing number of short sale transactions. More recent experience raises serious questions whether that optimism was misplaced.
On one hand, the Department of Treasury’s internal statistics through April 2011 purport to show that roughly 46% of HAFA Agreements started resulted in closed transactions. My own experience belies this rosy picture. We know that currently roughly 70,000 HAFA transactions are in some stage of processing. What these numbers and the DOT’s statistics don’t reflect is the number of HAFA applicants whose applications have been rejected for reasons wholly unrelated to their program eligibility.
Several of my clients have been told by lender representatives that the lender does not participate in HAFA, even though the lender is listed on the DOT’s approval lender list. Other clients have been summarily dismissed from HAFA following submission of required paperwork because program time deadlines were not met, even though the failure to meet those deadlines resulted from the lender’s own processing delays. Yet other lenders have outsourced HAFA processing to incompetent third party processors. The horror stories abound.
My concern is that, like the once ballyhooed and now roundly reviled HAMP program, lenders lack the qualified bandwidth to effectively process qualified HAFA applications. And with the frequent and multiple revisions to program eligibility guidelines, it’s not surprising many lenders simply don’t know if an applicant is qualified. The trend seems to be to simply reject the applicant, hope they don’t push back, and instead opt for HAFA’s far less beneficial deed-in-lieu program or simply walk away. Ultimately, and once again, it is the distressed homeowner who gets the shaft.
Hardly the hopeful we had once envisioned. Stay tuned.