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Details behind the BOA Short Sale Relocation Incentive Program

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Over the last few weeks there has been a lot of talk about the Bank of America Short Sale Relocation Incentive Program. The biggest questions are things like: How many people will this really apply to? How much money could this possibly mean for me if I do qualify?

I had a chance to discuss this program with BOA Spokesman Richard Simon this week and he was able to offer substantial insight into not only the program itself but the current BOA position on loss mitigation.

The first thing I wanted to know was how many BOA serviced mortgages would this program really affect and Mr. Simon had this to say.

"Bank of America currently services close to $1.7 trillion in loans. The initial mailings went to customers who have loans owned and serviced by Bank of America, but we are also offering the program on loans we service for others, if we have delegated authority to do so. Over 60% of loans in the servicing portfolio are held by the GSEs and HUD and are not eligible at this time."

As previously discussed the program currently applies to BOA owned and serviced mortgages but it appears that additional loans could be included if BOA has delegated authority on them. This improves on the previously reported 18% that this program was expected to affect.

To be eligible for the Short Sale Relocation Incentive Program you are still required to be in either the HAFA program or BOA's proprietary Coop Short Sale Program. The Coop program is not limited to only to BOA owned and serviced loans however and this accounts for the recent change to BOA literature regarding the Coop Program that now states the "investor may reserve the right to pursue deficiency". That statement does not apply to BOA owned and serviced mortgages and only applies to mortgages that are serviced by BOA but owned by a third party. Mr. Simon made it clear that BOA will waive it's right to pursue deficiency on mortgages owned and serviced by BOA and it is their hope that other investors will do the same.

"It is the bank’s belief that the program will be most attractive to borrowers if deficiencies are waived, and we will do so on loans we hold for investment (own and service). Other investors may reserve the right to pursue a deficiency, within applicable laws, but we hope and expect most will waive the right for the purpose of the incentive program."

The cash incentive for homeowner's taking part in the program (after meeting eligibility requirements) is advertised at $2,500 to $30,000 which is a pretty wide range. I was curious to find out what the average homeowner might expect if they were to take part in this program and Mr. Simon has this to say:

"Payments are expected to average in excess of $12,000 across the board for qualifying loans (bank-owned and serviced for others). In general, the calculation will result in higher payments applying to homes with higher values."

$12,000 is a pretty decent incentive to resolve your defaulted debt and cooperate with Bank of America to mitigate their loss. The goal of BOA is to offer the defaulted homeowner an alternative to just "walking away" as stated by Mr. Simon.

"This program mainly is aimed at customers who have exhausted possible home retention solutions to encourage them to consider short sale as a more positive transition alternative to waiting for the foreclosure process to run its course."

One of the issue with being required to take part in the HAFA and/or Coop Program is that you cannot have an offer and you must first get "qualified". This means you could potentially sit around for months waiting on an answer regarding your "acceptance" while a foreclosure action continues moving forward. I asked Mr. Simon how BOA was addressing concerns regarding the Equator system and the time it takes to get through the HAFA/Coop review process.

"While we hear both sides from agents and appreciate their input, mostly and increasingly, we receive positive comments about the constantly improving short sale processes. Steps taken during the housing crisis include:

The first industry application of Equator to increase efficiency in the short sale process
Early development and implementation the cooperative short sale
Increased staffing
Increased outreach and educational opportunities for agents
Recent process enhancement that allows simultaneous completion of multiple tasks previously completed in steps
As a measure of our success: In the first two years of the crisis (2008-09), we completed approximately 65,000 short sales. With the measures and emphasis we have taken In the last two years (2010-11), we completed 200,000 shorts sales, and more than 40,000 more in the first four months of this year. With more recent process changes, the relocation assistance offer and other steps, we expect to exceed last year’s record 107,000 sales."

Clearly BOA understands the urgent nature of the housing crisis in general and appears to be making concentrated efforts to improve their processes across the board. The recent changes to Equator that went into effect in April have not had a chance to really impact turnaround times yet but we should see something substantial in the next 30 days.

A big fear that may homeowners, and even their real estate agents, have is that they won't have enough time to go through a process like this before the foreclosure is done. Homeowners with legal representation will likely be able to have more than enough time (assuming they retain legal counsel early on and do not wait until a judgment has been entered). Those without legal counsel could potentially run out of time if they are not careful though. I asked Mr. Simon about this and what BOA would be doing to give these homeowners a chance.

"We believe foreclosure is a last resort. It is our intent to exhaust foreclosure prevention measures, first retention than transition solutions, prior to completing a foreclosure, to the extent we can within investor guidelines. The legal processes (notification, etc.) may continue, but during the short sale marketing period, we will consider postponement of the sale. On our owned portfolio, postponement, we do postpone. On loans serviced for others, the investor may have the authority to would make the final decision. For purposes of the relocation assistance program, the bank is not soliciting customers who already have a pending foreclosure sale."

So BOA owned and serviced loans will definitely get a little "pause" to help the homeowner and it is possible this could happen for other investors as well. It is important to note that BOA can't help you if you are already so far down the foreclosure road that a sale date has been set.

As more details emerge about the BOA Short Sale Relocation Assistance Program it looks increasingly favorable for SOME homeowners. Always seek legal counsel and the assistance of a licensed real estate agent before you take any action on your own. The program may offer an incentive for you to relocate but it is not an easy process to navigate and if you attempt to do it alone that incentive may not seem worth it in the end.

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