How HAFA Can Help
The Home Affordable Foreclosure Alternatives (HAFA) Program was designed to complement the Home Affordable Modification Program (HAMP) by helping current homeowners with mortgage debt who are eligible for HAMP but still cannot keep their home.
When a borrower applies for help from HAMP, not everyone succeeds with the program. Sometimes their lender is unable to approved a loan modification. Other times the borrower declines the terms of the loan modification. Some borrowers are approved and accept the terms of the modification, but fail to complete the program for various reasons. Before HAFA, these borrowers were usually headed for foreclosure.
HAFA gives those borrowers a viable alternative to foreclosure. If they have or want to find a buyer for their home, they may request approval for a short sale with pre-approval short sale terms and minimum acceptable net proceeds. If not, they may request approval for a deed-in-lieu. When a borrower applies for help with one of the HAFA solutions, the program already has their financial and hardship information from their HAMP application.
HAFA also imposes limits on the lender to help the borrower. Under the terms of this program, a lender must release the borrower from all future liability for the first mortgage debt. The lender may not ask the borrower for cash or a promissory note, and the lender may not ask a court for a deficiency judgment. The program also prohibits the lender from asking the listing real estate agent to discount their commission at the closing of a short sale.
All documents have been standardized and procedures, time frames, and deadlines have been streamlined under HAFA to make the process easier for both borrowers and lenders.
HAFA also provides financial incentives for both borrowers and lenders to participate in the program. Borrowers are entitled to receive $1,500 in relocation assistance, to be paid at closing. Lenders or loan servicers may receive up to $1,000 to help with administrative costs. There are also financial incentives for the lender or investor on the first mortgage to allow some of the proceeds from the sale of the property to be paid to subordinate lienholders.
Finally, participation in the HAFA program puts the foreclosure process on hold for the borrower. The lender may initiate the foreclosure process, but if the borrower is in the middle of the application process, or if any approved short sale or deed-in-lieu agreement has not been completed or reached its deadline, the lender may not complete the foreclosure process.
HAFA Relocation Assistance
$1,500 Relocation Assistance For Homeowner
When HAFA successfully closes a short sale or a deed-in-lieu, the program provides for $1,500 in relocation assistance to be given to the borrower. In the case of a short sale, the money comes out of the property sale proceeds. When a deed-in-lieu is completed, the service provides the funds.
Normally, the title company will add this amount to the HUD-1 statement before closing. They will then give a check at the borrower at the same time that all other payments are disbursed at closing.
In the case of a deed-in-lieu where there was no formal closing and the borrower has vacated the property, the loan servicer must mail the check to the borrower within 5 days of signing the paperwork.
Whether there was a closing or not, if the borrower has not vacated the property before the execution of the short sale or deed-in-lieu, the servicer or the title company must mail the check to the borrower within 5 days of the date they move and deliver the keys to the property to the servicer or the servicer’s agent.
HAFA will reimburse loan servicers for this amount after the transaction has been properly reported.
Do I qualify for HAFA?
A mortgage loan meets the basic eligibility criteria for HAFA if all of the following are true statements:
– The loan was for the principal residence of the borrower.
– The loan was a first lien mortgage originated on or before Jan. 1, 2009
– The mortgage is delinquent, or default is reasonably foreseeable.
– The unpaid principal balance on the loan is no more than $729,750 for a single-family property. $934,200 for a dual-unit property. $1,129,250 for a 3-unit property, or $1,403,400 for a 4-unit property.
– The total monthly payment on the mortgage including principal, interest, property taxes, hazard and flood insurance, condominium association fees, homeowner’s association fees, and any escrow payment shortage amounts subject to a repayment plan is more than 31% of the gross income of all borrowers on that mortgage.
– The loan servicer has already considered the borrower for a HAMP loan modification, and one of the following conditions applies.
– 1) The borrower does not qualify for a Trial Period Plan
– 2) The borrower does not successfully complete a Trial Period Plan
– 3) The borrower is delinquent on a HAMP modification by missing at least 2 consecutive payments.
– 4) The borrower requests a short sale or a deed-in-lieu.
Use of the term “borrower” means all borrowers on the mortgage in question.
HAMP-eligible borrowers must be considered for HAFA within 30 days of either the termination of the HAMP agreement or the request for either a short sale or a deed-in-lieu.
Every potentially eligible borrower must be considered for HAFA before the borrower’s loan is referred to foreclosure or the servicer allows a pending foreclosure sale to be conducted.
Loan servicers retain the right to accept or deny a HAFA application based on external factors, such as the severity of the loss involved, local market conditions, the timing of pending foreclosure actions, and borrower motivation and cooperation.
If you need help with your short sale, or know of anyone that needs help with their short sale, contact me anytime.
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