Home Affordable Foreclosure Alternatives Program (HAFA)

  

On April 5, 2010 the Home Affordable Foreclosure Alternatives (HAFA) program went into effect. HAFA was designed to help owners who are unable to retain their home under the Home Affordable Modification Program (HAMP). HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure. Servicers participating in HAMP are also required to comply with HAFA. HAFA provides the loan servicer, junior lien holder, and sellers incentives for these transactions and is designed to simplify and streamline short sales and deeds-in-lieu of foreclosure.

Who is eligible for HAFA?
The borrower must meet the basic eligibility criteria for HAMP:

• The home must be your primary residence.
• First lien originated before 2009.
• Mortgage must be delinquent or default is reasonably foreseeable.
• Unpaid principal balance no more than $729,750 (higher limits for 2 to 4 unit dwellings).
• Borrower’s total monthly payment exceeds 31% of gross income.

In addition, loan servicers must consider HAMP-eligible borrowers for HAFA within 30 days after the borrower does at least one of the following:

• Does not qualify for a HAMP trial period plan.
• Does not successfully complete a HAMP trial period plan.
• Is delinquent on a HAMP modification (misses at least 2 consecutive payments).
• Requests a short sale or DIL.

What are the benefits of HAFA?

• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds and approvable closing costs).
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed). In my opinion, this is the critical element. In addition, Junior lien holders accepting a HAFA incentive must also release borrowers from future liability.
• Uses standard processes, documents, and timeframes/deadlines.
• Provides financial incentives: $3,000 for borrower relocation assistance; $1,500 for servicers to cover administrative and processing costs; and up to $2,000 match for investors for allowing a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders.
• The loan servicer cannot complete a foreclosure during a fully executed short sale agreement or while determining the borrowers eligibility.

Not all loan servicers are currently participating in HAFA. Most of the big lenders are, including Bank of America, Chase, GMAC, and Wells Fargo. HAFA does not apply to FHA or VA loans. If your loan is owned or guaranteed by Fannie Mae or Freddie Mac you are not eligible for HAFA. How do you know? Try these links:

Fannie Mae Loan Lookup

Freddie Mac Loan Lookup

In 2009, the Treasury Department introduced the HAFA program to provide a viable option for homeowners who are unable to keep their homes through the existing Home Affordable Modification Program (HAMP). The HAFA program takes effect on April 5, 2010—although some servicers may implement it sooner, if they meet certain requirement--

HAFA FAQ - National Association of REALTORS Government Affairs Division

Revised HAFA Brochure April 28,2010

Home Affordable Foreclosures Alternatives Program: Guidelines and Forms 

HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. Servicers participating in HAMP are also required to comply with HAFA. A list of servicers participating in HAMP (including HAFA) is available at: www.makinghomeaffordable.com/contact_servicer.html.

HAFA Provisions

• Complements 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).
• 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 the following financial incentives:
  • $3,000 for borrower relocation assistance;
  • $1,500 for servicers to cover administrative and processing costs;
  • Up to $2,000 for investors who allow a total of up to $6,000 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.

  

Please call us today to help you determine if you qualify for the HAFA program - 623.536.1111