6.3 million homeowners are currently behind on their mortgage payments. Of those, perhaps 1.7 million borrowers are likely to be eligible for HAMP loan modifications (Home Affordable Modification Programs). There are currently only about 340,000 active, permanent loan modifications. The delinquency rate on these modifications is approximately 9.2%. Any borrower who either fails or is denied a HAMP modification is someone who should consider a Home Affordable Foreclosure Alternative (HAFA).

HAFA (Home Affordable Foreclosure Alternative) is a short sale program being sponsored by the U.S. Treasury Department. For the past couple of years, short sales have been haphazardly managed by banks without enough staff to focus on these transactions, no consistency in the procedures and not much interest in making them work. HAFA is the government’s effort to bring standardization to the proces and to make sure that a borrower’s right to stay in their home has been explored and protected.

 

Over the past couple of years, the government and lenders alike have learned that short sales make more sense than foreclosures. Short sale homes often remain occupied by the borrowers protecting the home from vandalism and lack of maintenance and the banks avoid the costs of foreclosing on properties (i.e., attorney’sfees, etc.). Short sales are better for the bottom line. Now they are motivated to make them work.

 

The are 3 important aspects of the HAFA program: 1) it enables a borrower to have a supported transition while avoiding the stigma of foreclosure; 2) mortgage debt is eliminated - the HAFA program mandates forgiveness of all liability for repayment to both first and second lien holders; and 3) the borrower receives a $3000 relocation assistance payment at the close of the transaction to help them with their move.

 

HAFA is a voluntary program that now counts over 200 banks as signatories. By agreeing to become a HAFA participant, banks agree to first offer a loan modification to owners as an alternative to a short sale or foreclosure. When a modification is not feasible, or is not desired by the owner, the next option for the homeowner is a short sale. To qualify for a HAFA short sale the owner must meet the following criteria:

·       The current unpaid principal balance is equal to or less than $729,500 (note: this limit applies to single family dwellings, higher limits apply to 2-4 unit dwellings);

·       The borrower’s total monthly mortgage payment exceeds 31% of the borrower’s gross income (note: monthly mortgage payment criteria includes principal, interest, property taxes, hazard insurance, flood insurance, and homeowner’s association fees);

·       The mortgage loan is a first lien mortgage originated on or before 1/1/2009;

·       The mortgage is delinquent or default is reasonably forseeable;

Of course, short sales have been - and continue to be - offered outside the HAFA program. Advantages of the HAFA program over standard programs are that it . . .

·       Allows the borrower to receive pre-approved short sale terms prior to listing the property - listing the property as an APPROVED HAFA SHORT SALE will attract many more buyers than a standard short sale because buyers and their agents will know that it is a shorter, more streamlined process and that the lender has already agreed to the terms of the listing;

·       If a buyer writes an offer that matches the asking price and terms for a HAFA short sale property, the bank MUST agree to the short sale - under standard programs the lender has no obligation to agree to the short sale.

·       Requires the borrower be fully released from future liability for the debt;

·       Uses standard process, documents and timeframes;

·       Provides financial incentives to borrowers, servicers and investors to close the short sale (i.e., $3000 to borrower at close to help with moving expenses);

I am a HAFA certified short sale specialist and member of Asset Plan Network Team of Short Sale Specialists. HAFA is a new program - as a homeowner facing some difficult decisions, you want to make sure to work with a professional specially trained and certified to navigate the process and protect your best interests.

 

If you, or someone you know, meets the criteria outlined in this article, or you would just like to know more about the program, it is my pleasure to assist you. Call or e-mail me any time and I will be glad to help you review the particulars of your situation to see if a HAFA short sale could benefit you.