HAFA - Home Affordable Foreclosure Alternatives Program
Short Sale And Home Loan Modification Assistance: Help is on the way, starting on April 5th
November 30, 2009, the Treasury Department released the guidelines and forms for its Home Affordable Foreclosure Alternatives Program also known as HAFA. HAFA’s intention, based on qualifying factors, is to make it easier for homeowners, who do not qualify for a Home Loan Modification, to have the alternative of selling their home as a “Short Sale”. This will dramatically speed up the often long and drawn out process of having the lender approve the owner for a short sale. By streamlining the process, HAFA will help to stabilize inventory levels and also home prices. How so? There is an easy answer. The cost/loss of quickly approving a short sale out weighs the cost and markdown of price of placing a home into a foreclosure. Consumers, the banks and the real estate market will win. HAFA works by providing monetary incentives connected with a short sale or a deed-in-lieu of foreclosure (DIL) in order to avoid foreclosure on a loan eligible for modification under the HAMP program. Servicers participating in HAMP are also required to comply with HAFA.
In other words, if a client fails to qualify for a home loan modification the bank/ lender will counter the loan modification applicant with an approved Short Sale Agreement with a predetermined price based on the market value. This allows the client to go to market immediately allowing for a motivated buyer to purchase the property quickly without further eroding home values.A list of servicers participating in HAMP is available at MakingHomeAffordable.gov. HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks.
HAFA is a complex program, with 43 pages of guidelines and forms (HAFA Program Guidelines). The program is designed to simplify and streamline the process of short sales and deeds-in-lieu of foreclosure by identifying homeowners who can no longer afford their home and/or who have experienced a loss of income or employment.
HAFA:
- The program works hand in hand with HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
- Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
- Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
- Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).
- Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
- Uses standard processes, documents, and timeframes/deadlines.
- Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).
- Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.
The program is effective on April 5, 2010, but servicers may implement it before then if they meet certain requirements. The program is set to expire on December 31, 2012.
ABOUT TED CANTO
Ted is an experienced Mortgage Advisor for the last 13+ years and is also known for his mortgage commentary and internet workshops within the real estate community. Also known as "The Mobile Mortgage Pro", Ted has honed the power of the smart phone, laptop, tablet computing, text, email and social media to ensure that he is always accessible to his clients' “wherever, whenever” to meet their needs. Ted has helped thousands of families finance their new home or refinance their current home in the Arizona and California market. Call, text, or email him to discuss your home financing @ 480.650.8602 or ted@tedcanto.com
Ted Canto
