I have a question for all the California Realtors. I am trying to process a Cal HFA short sale. Cal HFA owns all the notes, the 1st TD and 3 "quiet 2nds". The owner has jumped through all the hoops. HUD credit counseling, Spring Board Credit counseling, Loan Mod...everyone told him he could not afford the home anymore and to short sell it. After 3 months of trying to negotiate with Cal HFA, they have declined it 3 times. Each time they say he makes too much money and that the majority of his expenses do not qualify in their formula. We have had 2 budgets approved only to have items later disapproved as we substantiated additional expense that put him into the negative. In other words, every time we show he has to spend more than he makes, they dis-allow a previously allowed expense.

Cal HFA keeps telling me they do not have to follow any of the rules the banks need to follow because they are a Government Agency and took no TARP money (even though they did receive TARP money)


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I have heard these aren't easy short sales because of the silent 2nds, 3rds, etc. and I'm not experienced in this but I just wanted to bring the following up.  As I understand it, the silents are tied to the first and attached to the asset and must be paid off (cannot be subordinated or forgiven which sounds like that would include a short sale situation). The owner got downpayment assistance and he hasn't paid anything on it.  Unlike a 2nd lienholder, the State can't take a partial payoff and any new lenders (or the original lender of the 1st) wouldn't be able to remove these silents to clear the title.  I've read that a lot of these end up foreclosing because that's the only way to eliminate them unless they are paid in full.   Just some thoughts.  Good luck!

Per their website:

 Do I have to pay back my second and/or third loan(s)?

Yes; you signed both a Note and Deed of Trust. CalHFA subordinate financing {second and third loan(s)} is secured by a recorded lien on the property. If you pay off the first by selling the property, refinancing the first mortgage, or at maturity of the first mortgage, transfer title to the property, or allow others to assume the first mortgage, the subordinate financing becomes due and payable. These loans are not forgivable, nor do they go away after a period of time.

The language in CalHFA second Notes ties the loan to certain events that can occur on the first (maturity, sale, refinance) and the Notes do not otherwise have maturity dates of their own and cannot stand once the first is gone; therefore these loans cannot be subordinated.




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