What is HAFA and How Can it Help?

The HAFA (Home Affordable Foreclosure Alternative) program took effect on April 5, 2010 and is intended to allow homeowners in a pre-foreclosure/short sale situation to be able to sell the property free and clear without the risk of a deficiency judgment later on.

However, it is up to each lender specifically whether or not they allow a borrower to partake in HAFA, but is mandatory for a Freddie or Fannie backed loan.

The other thing to note about is that this is a very complicated and tricky program. Not a lot of real estate agents know about that. They don’t know the nuances about it and they don’t know how to implement it and they don’t know the proper government paperwork that needs to be submitted so it is in your best interest to understand that and work with a real estate agent or broker that is certified to handle these government short sale programs.

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:
o $3,000 for borrower relocation assistance;
o $1,500 for servicers to cover administrative and processing costs;
o 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.

A list of servicers participating in the HAFA program http://www.makinghomeaffordable.gov/get-assistance/contact-mortgage/Pages/default.aspx

Since the furture of the orginal HAMP program is uncertain due to recent legislative changes, the HAMP program set to expire in Dec 2012 may actually end a lot sooner. If you are interested in seeing if you can qualify for this program, please contact me ASAP for a consultation.

Please call 310.694.2288 directly.