HAFA Short Sales and the Second Lien Holder

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Perhaps by now you have heard that the HAFA guidelines changed in June. You are probably already familiar with HAFA, the Home Affordable Foreclosure Alternatives program that provides short sale and deed-in-lieu of foreclosure options to distressed borrowers.

The HAFA program has been around for a few years now. And just like anything else in the world, with age comes change. Most recently, the guidelines have been amended to change the way that HAFA transactions are reported to credit reporting agencies. Additionally, there have been changes to the rules with respect to occupancy and the HAFA program.

The change that appears to be on everyone’s tongue for the last few months is the change to the amount that MAY be offered to the second lien holder. Previously, the maximum amount that could be paid to the second lien holder was $6000. However, with the new guidelines a first lien holder can pay a second up to $8500.

This particular change seems to be a grey area for many second lien holders. And, if you are currently processing your own short sales, it’s important for you to understand that the first CAN pay the second up to $8500, but they are not required to do so. As such, you may have second lien holders that demand the $8500, while the first drags its heels at the lower amount.

There are a lot of great benefits of the HAFA short sale program. We, at Short Sale Expeditor® work to identify the programs for which short sale sellers may qualify and then complete the necessary paperwork in order to assist those sellers in getting any available relocation incentives (whether it be from HAFA, Chase, or Bank of America).

If you are having trouble processing your short sales or if you’d rather being doing other things with your time (like drinking martini’s, eating bon bons, or taking more listings), please do not hesitate to call on the amazing support staff at Short Sale Expeditor®. They can help you to get your next short sale closed.


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  1. Judy Brinkworth

    I am not in the real-estate business but have a question that I can’t get answered. My son’s wife took out a mortgage from a bank (backed by Freddie Mac) before she got married. They now want to get a short sale on this condo, which they are living in with their baby. His wife is a stay-at-home mom and has no other income. They feel, and I agree that this mortgage never should have been issued – as is the case with so many mortgages. Now they want to get a short sale – they submitted all the paperwork, citing a lot of factors, including the fact that my son never incurred this mortgage – she is the sole borrower – which took place before they got married – his name is not on anything and Freddie Mac came back without even looking at the hardship letter, etc. that because my son (borrower’s husband) is living at the same address and they haven’t been delinquent with mortgage payments – he has “ties” (their word) and he makes money – they were turned down. Is this even legal – everything I’ve read says he shouldn’t be liable for her debts. Oh, please answer. Thank you, Judy Brinkworth.

    • Melissa Zavala

      Each state has its own laws with respect to deficiency. I’m not sure what state you are in, but it might be best to check in with a good attorney in your state. We often see short sales where one half of a married is on the loan and on the title, and the other half is not very involved in the process.

  2. Helena

    question: is the formula for pay out to the 2nd figures 6% of the unpaid balance or a maxium of $8,500? I have a Bank of America negotiator telling me on their 111,000 loan they want 8,500 but the 1st lein holder say no its 6% of the unpaid balance. Which is correct… Thanks

  3. Maureen Amblerq

    I am in the process of negotiating a shore where the first lien holder (Wells Fargo) has agreend to pay the second lien holder (TD Bank) $4000.00 and this is a Freddie Mac Loan. Wells is also paying a relocation assistance of $3000.00 to seller at closing and a 6% commission to the realtors. TD Bank is telling me that the seller cannot receive any money and is telling me I have to reduce the commission to 5%. What can I tell the 2nd lien holder as I thought Wells and Freddie Mac drive what the second lien holder can do.
    Maureen Ambler

    • Melissa Zavala

      Despite what you may hear, the first does not really control what the second can do. You will need to push hard to get TD Bank to accept what is being offered, because I do not believe that Freddie Mac will allow you to give your commission money to the second lien holder (which is the direction that it appears the second is going).

  4. Linnea McCrary

    Melissa, I’m confused. I am trying to buy a Short Sale. Originally Wells Fargo did not offer the 2nd anything. Then the Agent informed Wells Fargo that there was a 2nd and that per HAFA they could offer them $6k. Now I get an email from the agent saying that we need to increase our price by $1K and that maybe at COE we can pay them that. It also says something else in the email from someone that they did not include. What it says is, As advised in the email below, either the price must be increased or the fees need to be cut to cover the additional $1,000. The current net is the minimum the investor will accept. Please advise. Thanks.

    This is after Wells, I was told offered $6K as per this email, . It appears the first lien is fnma loan which per short sale guidelines, they will pay 6k to second lien. I have brought this up to Wells Fargo. They were not aware of the second lien (it did not appear on title / credit report). They have requested that I get them a payoff statement from 2nd lien and the file will be reviewed once again for potential payoff of 2nd lien. I have also requested an extension to the 3/18 close of escorw. I will continue to monitor the status and keep you updated. BTW, I will be in California over the weekend and thru the middle of next week.

    Now, that is after I was told that the Lender would not offer anything to the 2nd and the letter from the Lender stated that as well. Well, if they didn’t know about the 2nd as the Agent said above then why did they specifically state in the original acceptance that they wouldn’t offer anything to the 2nd.

    What is going on? Who is either not being completely honest as it seems??? I really could use some answers as my agent, who I didn’t choose doesn’t know anything and works for the same company as the Listing Agent….

    • Melissa Zavala

      I’m a little confused by your story. What I can tell you is this: if you need to bring extra money to pay the 2nd lien holder, then this is NOT a HAFA short sale. In a HAFA short sale, the second needs to agree to accept what is offered by the first, and that can be anywhere up to 8500k, but not more. It’s not atypical for a buyer to pay a grand to a second lien holder, but the first needs to know about it and permit it on the final settlement statement. Hope that helps.

  5. Nicholas Torrez

    Hello Melissa,
    My fiance and I are purchasing a short sale from my cousin in California. We just found out that the loan officer handling our paperwork “found” a second lien holder and has to wait to submit “new” numbers before she gets an approval? I’m confused? Why is there a need for this second lien to be involved? After reading the thread, I’m not sure if my question was answered above, but would like some clarification on why it is necessary to complete our purchase of this home. Thank you.

    • Melissa Zavala

      Nick: That is a really good question. From what you are describing (and I do not have all the details), this is what I understand: you are buying a short sale. The seller has two loans, an neither is being paid in full. When this happens, the person doing the short sale negotiating is supposed to contact both of the lenders and work with each to approve the short sale. Since (and this is why it is always super important for listing agents to do their due diligence) the listing agent did not know about the second mortgage on the property, she (or he) now has to go back to the first lien holder and also to the second lien holder and negotiate with both lenders to get the second lien holder some money. In a perfect world, this will add another month to the short sale negotiation period. I’m sorry; I know this is not exactly the best news. If you have further questions, please let me know.

  6. Johana Diaz

    Hi Melissa,
    is a 2nd lien holder obligated to approve a short sale amount? I received HUD-1 and HUD-1 state 1st lien holder approved certain amount and Seller is getting $20,000. is this correct?

    • Melissa Zavala

      A seller can get $20000 in certain short sales, and the 2nd lien holder does have to approve the final HUD-1. If you have further questions about the specifics of your situation, please feel free to contact our office. We’ll be happy to run through the specific details of your situation with you!


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