What is HAFA, the Home Affordable Alternative Program?
The Home Affordable Foreclosure Alternative Program, HAFA was launched under the Obama Administration in 2009 to help assist distressed homeowners, borrowers, who are having financial hardship in making their mortgage payments to help them avoid foreclosure. Most of these borrowers are upside down or having negative equity in their homes as a result of the downturn in the real estate market. HAFA is part of the “Making Home Affordable” package which includes a number of specific programs which have currently been extended through December 31, 2013 which also has the intent to help stabilize the real estate market. Participation in HAFA is mandatory and required for lenders and servicers of loans that are either guaranteed or owned by Freddie Mac and Fannie Mae and for all of the other lenders and banks it is voluntary to sign up but most of them, above 80%, do participate in the HAFA program. The Federal Government realized that so many borrowers and homeowners that are distressed for many different reasons have used up the majority of reserves in their bank accounts and credit and that because of our current economic slowdown have been unable to “bounce back” the way they had originally planned that they would so the federal government has created HAFA along with other programs such as HAMP, the Home Affordable Modi fication Program, which is the loan modification program that all applicants for HAFA are automatically considered for when they put in their application for a HAFA short sale unless they request that they are not considered for a loan modification because they prefer to sell their home.
What is the Home Affordable Modification Program, HAMP?
I always tell my clients that if they truly would like to keep their home if possible they should apply for the HAMP loan modification which is a process very similar tothe HAFA short sale with almost identical paperwork and I guide them through this very confusing process. However if the client needs to move , ie. a job transfer, or prefers to move because they feel it would be in their best financial interest to sell their home short and “jump back” into the real estate housing market at a lower price with better mortgage loan terms in two years, which is about how long it will take until they are eligible to procure a new home loan they can request to not be considered for a loan modification.
What are the Benefits to the borrower/homeowner when considering a HAFA short sale compared to a Standard or traditional or normal short sale?
There are some benefits to the borrower/ homeowner who is considering doing a HAFA short sale as compared to a traditional short sale which are provided as an additional benefit to them. In a HAFA short sale the mortgage debt or lien debt is automatically forgiven and the debt is considered as “paid and settled” without any negotiations needing to be made by the short sale negotiator. Another benefit of a HAFA short sale over a traditional or standard short sale is that if there are two liens or mortgages such as a second equity line of credit or a HELOC, once the first mortgage lien holder accepts and gives short sale approval, the second lien holder automatically also must accept and approve of the short sale and the amount of payoff that the first lien holder has allotted. In a traditional or standard short sale when there are two mortgages or liens on the property the short sale negotiator must negotiate with both mortgage lien holders and once the first lien holder accepts the short sale then the second lien holder must also be convinced to accept the amount of payoff that is being offered to him or her for the release of the second lien and the forgiveness of the mortgage, debt and lien release.
I have been very successful at convincing the holder of the second liens to release the lien and also forgive the debt as settled and paid which is also almost with few exceptions automatic when both loans are with the same lender. However, when both loans are not with the same lender the process is a bit more difficult but I have been so far of this writing 100% successful in accomplishing the lien removal and full debt forgiveness by the second lien holder, equity line. It must be noted that not all homeowners qualify for the HAFA program but most homeowners do qualify for a short sale which is standard and traditional.
Examples of HAFA short sale approval letters
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