Just got off the phone with BOA about a short sale that they have the 2ndlien. Spoke to a Short Sale supervisor who told me that BOA will only offer HAFA assistance for 2nd liens when the 1stlien is also with BOA. She told me that the loss on the 2nd liens are to great!! I told her that the program guidelines state that if a servicer is participating in HAFA on 1st liens they must also participate with 2ndliens, even when the 1st lien is not theirs. The program was created so borrowers could do a Short Sale to waive the deficiencies. The most valuable part of the program is the subordinate lien release with out future liability. With out that, then the program is somewhat worthless. If BOA will not participate in that aspect of the program, why should they be able to participate as a 1st lien holder?
HAFA has great benefits for the 1st lien holders:
•1. reimbursement of 1/3 the cost of subordinate lien release
•2. $1,500 commission to the servicers
•3. Great Public Relations tool
•4. Staying in the good graces of Uncle Sam.
•5. Plus other sweet heart deals from the Treasury, FDIC, HUD, TARP or other tax funded agencies.
So, in closing, If BOA wants be the kinder, gentler bank, they must offer HAFA for 2nd liens or accept the demonized reputation that brought down County Wide!!
Mike Sher
HAFA, Release of Subordinate Liens guidelines below:
Release of Subordinate Liens. 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, will authorize the settlement agent to allow a portion 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. Each lien holder, in order of priority, may be paid no more than six percent (6%) of the unpaid principal balance of their loan, until the $6,000 aggregate cap is reached. Payments will be made at closing from the gross sale proceeds and must be reflected on the HUD-1 Settlement Statement. Investors are eligible for incentive reimbursement for up to one-third of the cost to extinguish subordinate liens as described in the Incentive Compensation section of this Supplemental Directive.
Prior to releasing any funds to subordinate mortgage/lien holder(s), the servicer through its agent must obtain written commitment from the subordinate lien holder that it will release the borrower from all claims and liability relating to the subordinate lien in exchange for receiving the agreed upon payoff amount. Although servicers have discretion to draft policies and procedures for ensuring that the commitment of subordinate lien holders is documented prior to closing and such documentation is retained in the servicing file, they would be in compliance with HAFA guidelines if they further required the closing attorney or agent to either confirm that they are in receipt of this commitment from subordinate lien holders on the HUD-1 Settlement Statement, or request that a copy of the written commitment provided by the subordinate lien holder be sent to the servicer with the HUD-1 Settlement Statement which is provided in advance of the closing.
Subordinate mortgage/lien holder(s) may not require contributions from either the real estate agent or borrower as a condition for releasing its lien and releasing the borrower from personal liability. In addition, any payments to subordinate mortgage/lien holder(s) related to the short sale or DIL must be reflected on the HUD-1 Settlement Statement, as applicable.
Supplemental Directive 09-09 Revised Page 11
