What if you didn’t have to fight foreclosure alone?
New alternatives are available

The government’s Home Affordable Foreclosure Alternatives Program is here… and you need an advocate.

You may have heard it before - it’s taking effect: our federal government is actively trying to combat the millions of foreclosures happening across the country. To address this need for new options, an initiative is in effect called the Affordable Foreclosure Alternatives Program, or HAFA. While the details of what this means to the government, lenders, services and agents are complicated, homeowners need to clearly understand the new solutions available.

This article provides a straightforward explanation of HAFA and, more importantly, what it means to homeowners.

First: What is HAMP?

The Home Affordable Modification Program (HAMP) was introduced in March of 2009 to assist homeowners whose mortgage payments were too high for their income levels (more specifically, those exceeding 31% of income).

For homeowners whose mortgage payments are only slightly out of reach, HAMP can lower the payments, allowing them to stay in their homes, Unfortunately, for most homeowners facing financial hardship, HAMP can’t offer a large enough mortgage reduction, so most who enter the program don’t qualify or end up defaulting on the modified mortgages.

Whether through government programs or a lender, this can be a difficult process to understand. Please contact me if you would like to find out if you qualify for a mortgage modification.

OK, so what is HAFA?

SPECIFICS

In order to qualify for the HAFA program, you first have to meet the initial HAMP criteria.

You must:

  1. Be delinquent on your mortgage or face imminent risk of default;
  2. Occupy the property as your primary residence;
  3. Have a mortgage originated on or before January 1, 2009;
  4. Have an unpaid principle balance no greater than $729,750 for a one-unit property; AND
  5. Have total monthly mortgage payments exceeding 31 percent of your gross income.
If you meet the above criteria, but a mortgage modification still leaves you with an unaffordable mortgage, HAFA becomes your primary solution to avoid foreclosure, salvage your credit score, and move on with dignity through a short sale or deed-in-lieu.

HAFA, or Home Affordable Foreclosure Alternatives, is the government’s newest program put in place to benefit homeowners who do not qualify for HAMP assistance. Released in April 2010, this program is designed to expedite foreclosure avoidance options for homeowners in need. By promoting the swift execution of a short sale or deed-in-lieu, HAFA can potentially save millions of homeowners from the financially devastating event of foreclosure.

In a short sale,
the property is sold for less than the mortgage amount in order to avoid the foreclosure process.

In a deed-in-lieu of foreclosure,
the property is given fully to the lender because the homeowner can no longer make payments, and the property is then sold to retrieve part of the loan balance owed.

HAFA only applies to loans that are not owned or guaranteed by Fannie Mae or Freddie Mac. A HAFA short sale or deed-in-lieu only applies to first lien mortgage loans, but the program does offer lender incentives to assist homeowners who have multiple mortgages on their property.

How Can HAFA Help ME?

HAFA can potentially save you a lot of grief and heartache by crating standardized processes and setting limits on how long a lender can wait to respond to short sale requests. Currently, short sales can be lengthy transactions, making it difficult for potential buyers of your home to remain in the process.

The program requires participating lenders to determine what they are willing to accept before dealing with a short sale request – similar to other pre-approval processes. This is so the lender can’t abruptly change how much money it wants to receive from the short sale. The fewer curveballs a lender can throw the better.

HAFA also benefits homeowners by stopping a lender’s ability to pursue a deficiency judgment after a short sale or deed-in-lieu has been completed.

A deficiency judgment is an action taken against a debtor or borrower whose foreclosure sale or short sale did not cover the entire mortgage debt owed to the lender. A lender’s ability to pursue this course depends on the conditions of the original loan.

Prohibition of a deficiency judgment means a lender can’t come knocking on a homeowner’s door to collect the portion of the mortgage not covered by the transaction. Such protection allows homeowners to more quickly regain financial stability and move on with your life.

Homeowners may also receive a $3,000 incentive upon completion of a short sale.

Why Are Lenders Participating?

HAFA offers lenders an incentive of up to $6,000 for a successfully processed short sale or deed-in-lieu. The lenders are not permitted to charge homeowners any processing fees or out-of-pocket expenses, and this incentive is given to them in exchange for that limitation.

The truth is a select few lenders and mortgage servicers may not participate in the HFA program. But despite this, a lender almost always loses more money in a foreclosure than in a short sale or deed-in-lieu. If a lender is convinced that a homeowner has no way of paying the current mortgage, they will be concerned with salvaging as much of their investment as possible, so short sales are generally the best option for them as well.

What If The Agent Can’t Find a Buyer for The Home?

If a short sale is attempted under HAFA and a transaction does not close by the program deadline, the lender will receive the homeowner’s deed-in-lieu of foreclosure. This will provide effectively the same result, since either way will result in a more positive solution to foreclosure, mortgage debt will be forgiven, credit scores will be salvaged, and homeowners will receive the $3,000 incentive to help with moving costs.

Which Lenders Are Currently Participating?

Generally speaking, lenders who participate in HAFA are also participating in HAMP. As a CDPE, Zac can always provide the most up-to-date list of lenders participating in HAFA. You can get the current list of participating lenders here.  

There is a lot to understand about this program and many aspects of it are likely to change. As a CDPE, Zac pays close attention to the changes as they happen, so that you can get the most relevant, current information, and the best possible service. If you would like to find out more about the HAMP or HAFA programs, or if someone you know needs assistance in avoiding foreclosure, please don’t hesitate to contact Zac at 404.564.7272. We’re here to help.

These (HAFA) options eliminate the need for potentially lengthy and expensive foreclosure proceedings, preserve the physical condition and value of the property by reducing the time a property is vacant, and allow the homeowners to transition with dignity to more affordable housing.

- David Stevens,
Commissioner of the Federal Housing Administration