While the HAFA program may be another drop in the foreclosure prevention pool it will not stop the REO wave expected later this year from Shadow Inventory, ALT-A, and Option ARM's. Actually it may only postpone the invevitable. Many borrowers are on to the game now and understand that first you default, then you apply for HAMP, then HAFA, and even if you don't qualify for any of them you just bought yourself several months of free occupancy. I personally recently listed an REO property that had occupants that had not paid a mortgage payment or rent for over 12 months. I have now have a new tenant occupied REO listing that can not provide signed rental agreement or proof of payment for the last 3 months rent who were just given 45 more days and a $1000 CFK offer from the lender/owner just to insure vacancy. As the old saying goes the jig is up! While many have actual hardships the majority are just flat out working the system.
Add to this the second TD $3000.00 cap and release of future legal rights to pursue the former borrower at a later date. This just is not the real world. Many lenders are working up relationships with collection agencies and will play "when in doubt wait them out" to see if the borrower was honest about their "hardship". When they apply for a new car loan or a new mortgage in 3 years, stating a rise in income and newly aquired assets, the prior lender may go after their new asset pool. Most non purchase money loans in CA will be looking at this as a recoup alternative very closely. This is why the terms letter for short sales outside HAFA usually reserve the right to future actions.
Sure a $1000 check to the servicer and a $1500 check to the borrower makes the program attractive but it is still a short sale and has all the tax, credit, and legal ramifications as a traditional short sale. So I for one do not think this will be the do all end all that the Government, our Trade Associations, or the Lenders are cheerleading us to belive will be the case. Time will tell.
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The funny part is that the media and the government are still allowing the public perception that the banks are the bad guys and that it was unamerican of these banks to demand execution of a legal contract in the wake of poor economic times. I say it is time to smell the coffee--if you are entitled to your unemployment benefits, the bank is entitled to their mortgage payments. Entitlement can not be a one way street and still lead to economic recovery.
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