Sell My House

The short answer to your first question is no, banks are not in the business of buying houses from their mortgage loan customers. In fact, if a bank owns a house it is highly motivated to sell the property as quickly as possible because banks are not in the business of buying and selling real estate. Banks make a profit on lending people and businesses money, and generally lose money anytime they get their hands on property. If you call your bank and tell them you want to sell it your house, the customer service representative will probably not know what to say other than, "No."

As for suggestions, I have several involving selling your house. My guess is with the recent decrease in housing prices the present market value of your house is less than the balance of your loan. If my assumption is incorrect, then disregard what I am about to say and simply consult with a real estate agent and sell your house. However, if the property is worth less than the value of the loan, read on.

Instead of selling the property, you may want to modify the mortgage, and instead of pocketing the savings, use it to add proper insulation to your house, repair or replace the furnace and cooling system, and make general repairs. Allow me to discuss modifying the mortgage before discussing your options to sell your house.

Making Home Affordable Program (MHA)

In 2009, the Obama Administration created the Making Home Affordable (MHA) program. A 17-page document titled Modification Program Guidelines outlines the 2009 provisions for trial loan modifications. An eligibility MHA questionnaire helps homeowners determine if they may qualify. This program has two components: 1) mortgage refinancing through Home Affordable Refinance Program (HARP); and 2) mortgage modification through Home Affordable Modification Program (HAMP). There are provisions that also include homeowners with second mortgages (liens) or even third mortgages. HAMP Borrower FAQs and HAMP Factsheet answer basic questions on the program. The Making Home Affordable Program Web site provides eligibility information, how to request a modification, and additional facts.

Home Affordable Modification Program (HAMP)

The HAMP overview page describes succinctly the requirements that borrowers must meet to be eligible. To summarize, HAMP is designed to help homeowners and servicers avoid foreclosure by modifying the terms of the loan to make the mortgage payments affordable for the long-term.

The HAMP qualifying criteria include:

1) Borrower is delinquent on their mortgage or faces imminent risk of default

2) Property is occupied as borrower's primary residence

3) Mortgage was originated on or before Jan. 1, 2009 and unpaid principal balance must be no greater than $729,750 for one-unit properties.

The HAMP overview page contains information about eligibility, program availability, and steps to take to process a HAMP request, including links to a request form, IRS 4506 form, and verification of income checklist.

Home Affordable Foreclosure Alternatives (HAFA)

HAFA concerns selling a house in short sale. You can short-sale a house within or outside of the HAFA program. Contact your bank to learn if it participates in HAFA, and if your loan qualifies for HAFA. HAFA alternatives are available to all HAMP-eligible borrowers who: 1) do not qualify for a Trial Period Plan; 2) do not successfully complete a Trial Period Plan; 3) miss at least two consecutive payment during a HAMP modification; or, 4) request a short sale or deed-in-lieu.

HAFA is complex with numerous guidelines set by the Treasury Dept. These new guidelines do not apply to loans by Fannie Mae, Freddie Mac, FHA or VA because these programs have their own short-sale programs that vary from HAFA.

HAFA provides incentives to mortgage lenders (servicers), seller, and other lien holders. There are deadlines that the mortgage lender and subsequent lien holder have to follow to provide timely progression on the sale of the property. HAFA simplifies and streamlines the short sale and deed in lieu process by providing a standard process flow, minimum performance timeframes, and standard documentation.

HAFA details

A 45-page HAFA Supplemental Directive 09-09: Home Affordable Foreclosure Alternatives – Short Sale and Deed-in-Lieu of Foreclosure Update provides detailed information, including a description of the current guidelines, plus the latest documents you need for the short sale or deed-in-lieu of foreclosure.

As mentioned, servicers need not participate in the government refinance programs, such as MHA, HAMP, or HAFA, though most do. However, the reality of the deadlines depends on the rigorousness of the servicer to implement the provisions.

The Treasury Dept. picked Freddie Mac to serve as the compliance agent and Fannie Mae as program administrator. The guidelines for payments are still under development by Fannie Mae as this was written.

Regarding credit reports, the servicer still may report to the consumer credit reporting agencies (i.e., Equifax, Experian, and TransUnion) the account as "full file" status. The 45-page document mentioned above contains further details on the credit reporting.

HAFA for existing borrowers (sellers)

Homeowners selling their homes with a deed in lieu of foreclosure or short sale will benefit from a more streamlined process that includes deadlines the servicers must follow, and a $3,000 payment to cover relocation expenses. Also, borrowers must receive disclosures of costs and net proceeds the servicer requires. The HAFA eligibility requirements are the same as the original HAMP.

The bank or financial institution servicing the mortgage (called a "servicer") must respond to a reasonable offer within 10 business days of receipt of all the required documents including the signed purchase offer and Request to Approve a Short-Sale (RASS). The servicer still has the option to reject the offer. However, this timeline will improve the chances of the borrower and purchaser to finalize the sale quickly.

Closing will occur in no less than 45 days, unless all parties agree to a shorter timeline. The most important provision for the borrower is that if the servicer participates in the HAFA program, and the first and second lien holders accept the incentives, then there can be no deficiency judgment. As with any other debt forgiveness, the servicer will issue any deficiency on IRS Form 1099C and may be taxed as income. As mentioned previously, see the Bills.com resource Mortgage Forgiveness Debt Relief Act to learn how to avoid taxes on forgiven mortgage debt.

HAFA for purchasers (buyers)

Read the supplement directive mentioned above for the program terms and conditions for purchaser obligations.

For example, the sale and purchase must be an "arms-length" transaction, which means that the buyer and seller must not be related by marriage, family, or commercial enterprise. The buyer also agrees not to sell the property for 90 days after closing. The 10-day time period is a great improvement because it has been common for purchasers to wait months for servicers to review offers.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com