HAFA, the much talked about Home Affordable Foreclosure Alternatives goes into effect tomorrow, April 5th, 2010. HAFA is actually a supplement to an existing government loan modification program known as Home Affordable Modification Program (HAMP). The basic idea is this: the HAFA program is supposed to allow a borrower who has gone through the HAMP program, the opportunity to sell their home on a short sale if borrower cannot successfully modify their loan through HAMP. Borrowers can also be offered the chance to do a Deed-in-Lieu (DIL) of Foreclosure. Under a Deed-in-Lieu, a property is given back to the lender by the borrower. This alternative is least appealing to the lender as they now are stuck with a home to manage and eventually dispose.
Under HAFA, borrowers would be allowed the opportunity to sell their home at a predetermined price and accelerated pace. This would increase the likelihood of a successful sale as the shorter time frame would entice more buyers who would feel secure by the pre-approved nature of the short sale.
If there is 2nd mortgage on a home, that lender would also receive up to 6% of the outstanding loan balance with a maximum of $6,000. If for example, you have a $50,000 2nd mortgage, then under HAFA, $3,000 would be taken out of the purchase price and be applied to the balance owed to the 2nd mortgage holder as an incentive to them to proceed with the short sale.
Additional benefits would also include:
- Borrowers would also receive up to $3,000 at the closing to help offset relocation costs. That’s $3,000 you can use to move.
- Servicing Lender or the Investor approving under HAFA cannot pursue you after closing for the deficiency balance nor can they require a cash contribution of promissory note from the borrower!
- You can still request a short sale under HAFA even if you do not want to pursue a loan modification under HAMP.
- Closing costs; just as in a regular short sale, costs are generally covered directly out of the sales price, including Realtor commissions.
- Standardization of the forms in processing the short sale request.
Here are the basic requirements to be considered under HAFA:
- The property is the borrower’s principle residence (sorry, no investors)
- Loan was originated before 2009
- The mortgage is in default or reasonable foreseeable (no, you don’t have to be late yet!)
- Lien must have a balance less than $729,750
- Mortgage payment must exceed 31% of the borrower’s gross income
Your loan servicer will have 30 days to determine of you can qualify for their loan modification Trial Period. If you do not successfully complete the trial period or request a short sale, the loan servicer will have to consider you for HAFA consideration.
IMPORTANT: Either the bank will deny your acceptance or they will send you a short sale agreement for you to sign and return. Your loan servicer will contact you via a letter (if you’re suffering from avoidance and not opening your mail, stop that practice and read all correspondences from your bank) and you will have only 14 calendar days to respond.
HAFA is a step in the right direction, but not a final solution to the problems associated with short sales. Most likely it will turn out to be a work in progress as it is the first real attempt to standardize and set faster guidelines for the short sale approval process. As with any government program, the reality often does not match the intentions as programs are often over-hyped and unintended consequences are not yet known. It is important to remember that some loans will not qualify. FHA, Fannie Mae and Freddie Mac loans, but to be sure contact your loan servicer.
ESPECIALLY IMPORTANT IS THAT 2ND MORTGAGES ARE NOT BOUND BY HAFA GUIDELINES. If you have two mortgages and the first approves you under HAFA, the 2nd will still have to approve the short sale.
To begin, borrowers should contact the lender which is in 1st position to request participation in HAMP/HAFA. (For a list of participating lenders and a HAFA overview brochure, please email or call me)
Borrowers should also contact their 2nd loans. If you do nothing and the 2nd ends up seriously delinquent, they may just sell it off to a collection agency, who are often more difficult to work with on short sales.
If you are have additional questions and are considering a short sale in the Las Vegas/Henderson, Nevada area, please contact us to handle your short sale. We do HAFA short sales as well as non-HAFA short sales.
Paul Rowe is the managing agent of the short sale division for the Sena Team of North American Realty of Nevada. He can be reached at 702-497-9142. Email: prowe22 @ gmail.com
We are not the FHA, VA, USDA, HUD or any other government organization. The content on this blog is intended for information purposes only. 
Great information Tony! I think this has the potential to be an excellent program. I have been diligently studying the guidelines for borrowers and Realtors regarding HAFA. Borrowers who have not attempted to do a HAMP modification, can also still qualify for the HAFA short sale. I just called one participating lender this morning on behalf of my client who is delinquent. Upon sending them a few of the required docs, they informed me that they are not abidding by any timelines in which to respond to our request and send us the SSA for my clients signature. I was informed that they have 350,000 loans nationwide and those that are currently in short sale review need to be addressed first. They do not have the manpower to start addressing requests for a HAFA short sale before all others.
Now maybe you can help me here. I can wait to list the house until they respond to our request but in the meantime, my client is delinquent and if we wait it out, they may end up with a foreclosure notice. In this instance we have decided to go forward with a conventional short sale and then submit a request for a HAFA Alternative Short Sale. This will enable us to submit the request even at the point where we have a qualified buyer for the property.
So until the banks get up to speed and maybe hire more people to work on these requests, we may have to just start out the conventional way. Especially if borrowers are several months behind and facing foreclosure.
Advice…please contact your local Realtor qualified in short sales and knowledgeable in the HAFA program BEFORE you become delinquent.
Elise Fay specializes in Short Sales in Arizona. Contact her at 602-329-7782 for additional information regarding this program.
This is a very informative article. If a lender is participating in the program and they do not meet the timelines for responses, such as what Elise Fay’s comment suggests, what recourse do the borrowers have? Are there any ramifications from the government? I saw that the program calls for representatives from Fannie Mae to monitor the banks’ usage of HAFA but did not see any repercussions for not following guidelines. I think this program is a step in the right direction but I have a better solution. Let me know what you think of this: http://north-scottsdalerealestate.com/financing-info/how-to-solve-the-housing-crisis-my-short-sale-solution-program-north-scottsdale-real-estate
Keep up the great work!
Remember all, HAFA will only apply to primary residences and non-GSE loans…no Fannie, Freddie etc. That will eliminate a lot of properties. In addition, some of these people, especially in areas not completely obliterated by falling prices will qualify for HAMP loan modification. I suspect maybe 10-15% might be helped by HAFA. That will leave the core of your businesses unchanged.
With regards to concerns about approaching sale dates while you are waiting for a HAFA decision:
1. The times shouldn’t be any longer than what you already experience on your non-HAFA decisions, maybe even faster. We’ll have to wait and see if these timelines being flaunted are realistic or vulnerable to the usual manipulations employed by the lending institutions.
2. The bank that has an impending HAFA decision is prohibited from foreclosing during that time.
Good information Tony. I would like to use this information on my next listing short sale appointment. There are a lot of mis-conceptions about short sales and the HAFA program. Very good article!