Understanding Alternatives to Foreclosure... Updates on Loan Modifications under HAMP and the new HAFA guidelines
2009 Year in Review - A Year of Change & Adjustment

Home Affordable Foreclosure Alternatives Program (HAFA) Guidelines

The following is a re-posting of the recent article from Realtor.org on the newly released guidelines for the Home Affordable Foreclosure Alternatives Program (HAFA) with added commentary from me :)

Making Home Affordable

On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA). HAFA is part of 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 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 is available at MakingHomeAffordable.govNOTE: Not All Loan Servicers are participating!

HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks.

HAFA is a complex program, with 43 pages of guidelines and forms, designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure.

Download the official document: Download Hampupdate122309

HAFA:

  • 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. This is why it is so important for real estate professionals to understand ALL alternatives to foreclosures!  See my recent posts on Understanding Alternatives...
  • Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).  Hopefully this will speed up the lengthy process everyone has been experiencing for final short sale approval.  Are you a CSP yet?  Check upcoming course dates.
  • Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent). Yeah!
  • Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).  A welcomed relief for Nevada homeowners...Deficiency Judgment issues will be the biggest impediment to successful short sale closings as homeowners and real estate agents are better educated.
  • Uses standard processes, documents, and timeframes/deadlines. Have not seen the forms / standards as of yet...
  • Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).

The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements. The program sunsets on December 31, 2012.

Press Release, HAMP Update—New Program Offers Borrowers Foreclosure Alternatives

Supplemental Directive 09-09, Introduction of Home Affordable Foreclosure Alternatives—Short Sale and Deed-in-Lieu of Foreclosure

 

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