In 2009, the Treasury Department introduced the Home Affordable Foreclosure Alternatives (HAFA) program to provide a viable option for homeowners who are unable to keep their homes through the existing Home Affordable Modification Program (HAMP). If you are not eligible for HAMP, you should pursue a HAFA short sale, which you may be eligible for if you been turned down for HAMP, or if you were accepted into HAMP but stopped making your loan modification payments. The HAFA program took effect on April 5, 2010 and sunsets on December 31, 2012.
Home Affordable Foreclosure Alternatives (HAFA) Program
HAFA provides additional options to avoid foreclosure and offers incentives to homeowners who utilize a short sale or deed-in-lieu (DIL) to avoid foreclosure. HAFA alternatives are available to all HAMP-eligible borrowers who:
1) do not qualify for a Trial Period Plan
2) do not successfully complete a Trial Period Plan
3) miss at least two consecutive payments during a HAMP modification
4) request a short sale or DIL.
Eligibility Requirements for a HAFA short sale:
If you are rejected for a loan modification through the HAMP Program, you will be eligible to apply to the HAFA Short Sale program or pursue a Deed in-Lieu-of Foreclosure. HAFA will pre-approve the price of the short sale and give you 4 months to sell the property through a real estate agent. The eligibility requirements include:
Only personal residences are eligible.
The mortgage amount must be less than $729,750.
The seller must be 60+ days behind on the mortgage.
The mortgage originated before January 1, 2009.
The seller was rejected by HAMP for a loan modification.
Benefits to a HAFA short sale:
Lenders that participate in HAFA waive the right to a deficiency judgment
Junior lenders can receive up to 6% of the loan balance or $6,000 maximum to release the loan.
Sellers will receive a government payment of $3,000 at close of escrow to cover relocation expenses.
Sellers will not be required to make a seller contribution.
Lenders must agree not to foreclose during the short sale process.
Another condition of HAFA is that all parties must sign an arm's length affidavit. In other words, the seller cannot sell to a person the seller knows or to whom the seller is related. The buyer must also agree not to sell the property for a minimum of 90 days. Generally, if the homeowner makes a good faith effort to sell the property but is not successful, a lender may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the lender - provided the title is free and clear of mortgages, liens and encumbrances.