Many homeowners may feel that they can no longer afford their home, but want to avoid the negative effects of foreclosure.  The Home Affordable Foreclosure Alternatives (HAFA) Program offers homeowners, their mortgage servicers, and investors an incentive for completing a short sale or deed-in-lieu of foreclosure.  With these options, under HAFA, a homeowner leaves their home to transition to more affordable housing and alleviate the mortgage debt they owe.

About HAFA

HAFA is a program primarily designed for homeowners who are unable to stay in their home even with a loan modification under the Home Affordable Modification Program (HAMP).  Under HAFA, homeowners may be able to avoid a foreclosure by selling the home as a “short sale” (where the value of the home is less than the remaining amount of the mortgage) or by transferring title to the lender through a process called a “deed-in-lieu of foreclosure.” 
 
The HAFA program 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 under HAMP.    Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds and acceptable closing costs).   Requires borrowers to be fully released from future liability for the first mortgage debt and, if the subordinate lien holders receive an incentive under HAFA, those debts as well (no cash contribution, promissory note, or deficiency judgment is allowed).   Uses a standard process, uniform documents, and deadlines.   Provides financial incentives: $3,000 for borrower relocation assistance; $1,500 for mortgage servicers to cover administrative and processing costs; and up to a $2,000 match for mortgage investors for allowing a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders (up to 6 percent of the remaining balance of each junior lien).    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 sunsets on December 31, 2012.

These options are available for homeowners who:

What is a "Short Sale"?

A short sale can be an excellent solution for homeowners who need to sell, and who owe more on their homes than they are worth. In the past, it was rare for a bank or lender to accept a short sale.  Today, however, due to overwhelming market changes, banks and lenders have become much more negotiable when it comes to these transactions.  Recent changes in corporate policy and the Obama administration have also improved the chances of getting a short sale approved. But to be technical, here's a more official definition:

A homeowner is 'short' when the amount owed on his/her property is higher than current market value. A short sale occurs when a negotiation is entered into with the homeowner's mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then 'sold short' of the total value of the mortgage. For homeowners to qualify for a short sale, they must fall into all of the following circumstances: Financial Hardship – There is a situation causing you to have trouble affording your mortgage. Monthly Income Shortfall – In other words: "You have more monthly bills than money." A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage. Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.

 

This seems simple enough, but it is a complicated process that takes the expertise of experienced professionals.  Real estate professionals with the Certified Distressed Property Expert designation have trained extensively to understand the options, solutions and effective methods for dealing with homeowners facing hardships.  Don't risk your financial future and the potential sale of your home with an agent who does not have all of the solutions.  We are your CDPE experts.  Together, we can identify all possible options and, if appropriate, assist you in the execution of a short sale transaction.

What is a "Deed-in-Lieu of Foreclosure"?

Generally, if the borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a deed-in-lieu of foreclosure.  With a deed-in-lieu, the borrower voluntarily transfers ownership of the property to the servicer - provided the title is free and clear of mortgages, liens, and encumbrances.

The HAFA Program streamlines both of these options to make them easier for a homeowner to work with their servicer.  Under the program, a homeowner can receive $3,000 to help with relocation costs.

 

 

 

  We are Certified Distressed Property Experts.  Call us today for more information.

 

 

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