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The REST platform’s Loan Disposition Analysis Report contains several alternatives outcomes that are more or less favorable to the investors of your loan than a foreclosure. Generally speaking, the servicer of your delinquent mortgage loan has been shown to be more profitable foreclosing than any other option. What you want to do is show the mortgage servicer that they have to do what’s in the best interest of the investor of your loan, if the REST Report shows that the alternatives to foreclosure are better than foreclosure sale.
The REST Report findings include the three following modification options as well as one short sale option, and one HAFA option. A homeowner may be eligible for more than one option from those below. It is up to the servicer to select the best alternative for the investor if more than one outcome is an eligible result.
The Net Present Value Test (NPV)
CAP Modification Outcome:
FLEX Modification Outcome:
HAMP Modification Outcome:
HOME AFFORDABLE FORECLOSURE ALTERNATIVE (HAFA) SHORT SALE - PROGRAM HIGHLIGHTS
Under the Government’s Home Affordable Modification Program, servicers must consider eligible borrowers for a HAFA Short Sale within 30 calendar days of the date the borrower:
- Does not qualify for a HAMP Trial Period Plan
- Does not successfully complete a Trial Period Plan
- Is delinquent on a HAMP modification by missing at least two consecutive payments, or
- Requests a Short Sale
In the event that a borrower has an executed sales contract and requests the servicer to approve a short sale, the servicer ‘must’ evaluate the borrower for HAFA . The borrower needs to submit the request to the servicer in the form of an Alternative Request for Approval of Short Sale (Alternative RASS). Upon receipt of the Alternative RASS, the servicer must determine the basic eligibility of the borrower. If the servicer approves the short sale, then the loan qualifies for the HAFA program. If the borrower appears to be eligible and was not previously considered for a Trial Period Plan, the servicer must also notify the borrower verbally or in writing of the availability of a HAMP loan modification and allow the borrower up to 14 calendar days from the date of the notification to contact the servicer by verbal or written communication and request consideration for a HAMP modification.
The servicer must release its first mortgage lien within ten business days (or earlier if required by state or local laws) after receipt of sale proceeds from a short sale. Additionally, the investor must waive all rights to seek a deficiency judgment and may not require the borrower to sign a promissory note for the deficiency.
It is the responsibility of the borrower to deliver clear marketable title to the purchaser or investor and to work with the listing broker, settlement agent and/or lien holders to clear title impediments. The servicer may, but is not required to, negotiate with subordinate lien holders on behalf of the borrower. The servicer, on behalf of the investor, can authorize the settlement agent to allow up to an aggregate of $3,000 of the gross sale proceeds as payment(s) to subordinate mortgage/lien holder(s) in exchange for a lien release and full release of borrower liability.
At the servicer’s discretion, the servicer may still initiate foreclosure or continue with an existing foreclosure proceeding during the HAFA process, but may not complete a foreclosure sale:
- While determining the borrower’s eligibility and qualification for HAMP or HAFA
- While awaiting the timely return of a fully executed Short Sale Agreement (SSA)
- During the term of a fully executed Short Sale Agreement (SSA)
- Pending transfer of property ownership based on an approved sales contract per the RASS or ARASS
Servicers may not charge the borrower any administrative processing fees in connection with HAFA. The servicer must pay all out-of-pocket expenses, including but not limited to notary fees, recordation fees, release fees, title costs, property valuation fees, credit Supplemental Directive, report fees or other allowable and documented expenses. (The servicer may add these costs to the outstanding debt in accordance with borrower’s mortgage documents and applicable laws in the event the short sale is not completed.)
PROPOSED SHORT SALE AGREEMENT/TERMS
Within 24 hours (one business day) after closing, the closing agent/attorney are to forward to the servicer:
o A copy of the fully executed sales contract.
o A copy of the fully executed HUD-1 Settlement.
Upon successful closing of an acceptable Short Sale, the borrower would be entitled to a relocation
incentive of $1,500
A monthly mortgage payment may be required from the borrower during the term of the Short Sale Agreement. The monthly mortgage payment, if any, is negotiable but may never exceed 31% of the borrower’s gross monthly income ( is 31% of the submitted $5,383.00 gross monthly income).
INFORMATION ABOUT THE AUTOMATED VALUE MODELING (AVM) USED FOR THE ANALYSIS