Why Ocwen HAFA Short Sales WASTE TIME in Massachusetts!

My favorite line when I speak to a new homeowner is to state there is nothing short about applying for a short sale. Short sales are LONG!! They are paperwork heavy. They are tedious and many lenders just restart, and restart the process (Chase) and even though the CFPB (Consumer Protection Finance Bureau) and even some investors like Freddie and Fannie have touted rules and regulations, for servicers and lenders to shorten the process, it’s still lengthy and cumbersome. The problem is, there is no true enforcement or regulation of the time frames. I have literally filed a complaint with the CPFB to show that a servicer did NOT acknowledge the sale within the 5 day window of submission, like they are supposed to, and watched that same servicer BACKDATE an acknowledgement letter to the 5th day. It’s sickening. Anyways, my point, is that short sales are LONG enough without adding a extra time.

This brings me to Ocwen and how MUCH extra time they add to their short sales. Specifically their HAFA short sales. HAFA stands for the Home Affordable Finance Alternative that the Treasury enacted to assist struggling borrowers. Initially, I didn’t like the program much, but after the kinks were out of it, it grew on me. Now I like it. It has been revamped several times too. Most borrowers can apply for a HAFA short sale so long as their loan was originated before 2009, or is Freddie/Fannie/FHA backed. There are other program requirements, but those are the main ones. Ocwen Freddie backed sales are much better, but I digress.

Each servicer (Ocwen) has a HAFA matrix which outlines their program to their borrowers. Interestingly, at the publication of this article Ocwen has removed their matrix. I can only assume it is being removed, so their NEW guidelines can be published. The problem with both the OLD and (ASSUMED NEW) HAFA matrix is the valuation accountability. There are two fundamental issues with their short sales. I will tackle the valuation issue first, and the HUBZU issue second.

The old matrix says they are required to do the following, pertaining to the valuation, when evaluating a borrower for a HAFA short sale:
————————————–
NMLS #: 1852 (see here)

VALUATIONS

SHORT SALE

During a HAFA Short Sale review, Ocwen requires a recent assessment of the market value of the subject property by Brokers Price Opinion (BPO). The assessment should be within 150 days of the review (to be obtained by Ocwen). The market value must exceed $20,000.

Disputed Valuations

–

If the borrower(s) or realtor(s) wish to dispute the value, they must submit a copy of the Comparative Market
Analysis (CMA) form to Ocwen at Email: ss@ocwen.com

.

The estimated evaluation timeline will be approximately 10 business days

——————————————-

The issue with the old matrix and NEW matrix is the loose language regarding the BPO – it does not specify INTERIOR BPO – It does not specify, even better, an appraisal of the property. Now, I cannot necessarily fault Ocwen entirely because the TREASURY gives the servicers a wide range when developing their matrix. They do not specify that valuations should be INTERIOR valuations or appraisals, so what servicer in their right mind would PAY MORE to get a valuation on a property, when in essence they can do a drive by BPO, and get a valuation to comply with Treasury guidelines?

The reason this process is a waste of time is that drive by BPO’s are, in my opinion, are NEVER EVER accurate. The agent may not see that pipes are burst, or mold is growing, or heating systems don’t work, or structures are unstable. These are some of the bigger issues that could greatly impact the valuation of a property.   Not unsurprising, the value comes in too high, which then has to be disputed. All of this sucks up time. Ocwen now wants comps, repair estimates, etc to allow for the dispute. This too takes time and again, the borrower is subject to the valuation ghost at Ocwen. People say the valuation department exists, but I’ve never spoken to anyone in it. It never seems to spit back an accurate reading of a dispute, nor exterior bpo, so then your sale will fail and you have to remarket the property.

This is where I fault the Treasury AND Ocwen. If they were to just order an interior BPO then you may have a CHANCE of having a more accurate valuation out of the gate, so as not to waste time. Even better, servicers should be MANDATED to order appraisals, which are in my humble opinion again even MORE accurate. Certainly much more accurate than a drive by BPO which is all that the servicers are required to do.

It’s hypocrisy at its best. When a borrower APPLIES for a loan, is reviewed for a loan, wants credit to buy the house and signs a note, the lender MUST have an appraisal done, however, when a borrower is losing a home, and the borrower is reviewed for loss mitigation options which most must be reviewed for, the lender only has to do the bare minimum to meet government requirements.

No wonder investors are losing their shirts in the housing market. You have servicers not really trying to get the most money for a property, but seeing how long they can milk the servicing before eventually foreclosing. I won’t even go into the ghost valuations. Most borrowers don’t get to SEE their valuations, unless they are HUD backed. Again, when they apply for a loan, and are required to meet loan requirements by getting the property appraised, that appraisal is then seen by the borrower, however, when the same borrower needs a valuation for loss mitigation purposes, that valuation is RARELY if ever seen by the borrower, and yes, the valuation fees are charged to the borrower on the loan.

I suspect Ocwen’s NEW HAFA matrix once published will read as follows:
Property Valuation

Valuation is obtained based on an EXTERIOR Broker Price Opinion.

Disputed Valuations

1.Borrower/Agent needs to provide the negotiator supporting

documentation including:

3-5 comparables with complete MLS Sheets as well as agent comments and photos

x

Comparable properties should be current and in close proximity to the subject property

x

Work orders or repair estimates with photos

2.The review will take 5-10 business days and a response will be provided to borrower/agent

Because of this cumbersome, unrealistic valuation process almost everyone loses. The borrower loses because they are likely to lose a qualified buyer, and spend more months and time reapplying for a new short sale tacking on more missed payments. The buyer loses, because they will never be able to offer the unrealistic exterior BPO value, so they have just wasted time and money trying to purchase something that the seller’s lender doesn’t want to fix. The investor of the loan loses for the same reason. More missed payments, mean a bigger loss for the investor, however Ocwen and the servicers are the big winners. Keep in mind they are being paid to service the loan.

Let’s go to my SECOND reason that the Ocwen HAFA (or any short sale) can be a big HUGE waste of time. It’s called the HUBZU requirement, and in Massachusetts if you are an agent with MLS you cannot comply with it.

Ocwen has a requirement that most of their interior loans also be placed on their auction site called HUBZU, via Altisource. They have a ridiculous slew of additional paperwork (see here) for the borrower to read and agent to sign. This paperwork essentially allows Altisource and Hubzu to insert themselves into the current transaction and listing and requires the listing agent to then MARKET the property on MLS and point additional purchasers to Hubzu. They use the MLS platform to then advertise the property on HUBZU, which MLS shouldn’t like, nor do they. The agent will violate MLS regulations if they comply with the Ocwen/Hubzu/Altisource process. I have spoken with reps at MLS and as an agent in Massachusetts you CAN NOT comply with this process. The following was published on MLS on 5/15/2015:
FROM OUR MLS SYSTEM: 5/15/2015 An Important Reminder on Auction Listings As a reminder,

>>> you may list a property for sale at auction in the MLS only if both (1) you as the listing broker are ultimately responsible for the auction, subject to your “Exclusive Right to Auction” agreement directly with the seller; and (2) you list the property in MLS as an Auction Listing, with the type of listing agreement specified as Exclusive Right to Auction.

>>> An auction may be listed in the MLS service only by a participant or subscriber that is a licensed broker or auctioneer. Please note that MLS PIN does not accept listings in which the seller has directly engaged a non-participant auctioneer to sell the property at auction

I also spoke directly to a rep at MLS who emailed me the following:

Below are the requirements to list an Auction listing within our system:

1. You must meet all licensing requirements to sell property at auction. In Massachusetts, you would need a current auctioneer’s license or real‐estate broker’s license;
2. You would need an Exclusive Right to Auction agreement with the seller. In other words, your listing agreement should make you responsible for the auction;
3. The current MLS listing should be withdrawn or cancelled;
4. You could input a new “Auction Listing” to MLS, with the type of listing agreement specified as Exclusive Right to

Auction;

5. You must offer cooperation and compensation to other MLS participants; and
6. The new Auction Listing must meet all legal requirements for the advertising of an auction. If you have

questions on the requirements for advertising or selling property at auction, you may wish to speak with legal counsel or contact the Massachusetts Division of Standards.

Any way you slice is, taking your short sale and TRYING to comply with the Altisource requirement is going to waste more time.

Even when Altisource and HUBZU allow you to just negotiate the sale through Ocwen, it can still take an additional 1-3 weeks for them to sort through sending the file back to Ocwen to negotiate.

It’s a nightmare for any homeowner or borrower trying to do a short sale.

Anyways, our firm does work through all of these issues and we have had multiple successful Ocwen short sales, but they are not short, nor easy. Any buyer, seller or agent should be aware of the time it takes to work through the Ocwen Short Sale process.

It’s unfortunate that to save a few dollars ordering an interior BPO, months of time must be wasted. I can only assume investors of these loans lose hundreds of thousands of dollars, and it seems we all just have to suck it up as the Treasury just didn’t care enough to require servicers to at bare minimum to order INTERIOR valuations. You can’t fault Ocwen for that. They are winning all around.