New Home Affordable Foreclosure Alternatives Program Implemented

HAFA stands for Home Affordable Foreclosure Alternatives, which is part of the Making Home Affordable Program. The first step is for a home owner/borrower to apply to HAMP, Home Affordable Modification Program.  To be eligible for the HAMP program, you must fall under these rules:

• Only personal residences are eligible.
• The mortgage amount must be less than $729,750.
• The borrower suffers a hardship such as loss of income, an increased mortgage payment or an unexpected increase of expenses.
• The mortgage originated before January 1, 2009.
• The principal/interest/taxes/insurance mortgage payment, including home owner association dues, is greater than 31% of the borrower’s gross monthly income.

If any of the 5 rules don’t apply, then you’re not going to be eligible.

If you are eligible for HAMP, it does not necessarily mean that you will qualify for HAMP. Eligibility and qualification for HAMP are two different animals. If your intention is to do a short sale, then you really want HAMP to turn you down because then you’d be eligible for HAFA.

It’s important to know if your lender participates in the HAMP program. Mortgage companies that participate in HAMP also participate in HAFA. All Fannie Mae and Freddie Mac lenders are required to participate. Here is a partial list of participating lenders:

• Aurora Loan Services
• Bank of America
• Chase Home Finance
• CitiMortgage
• Countrywide Home Loans Servicing
• EMC Mortgage Corporation
• GMAC Mortgage
• Green Tree Servicing
• HomeEq Servicing
• Horizon Bank
• J.P.Morgan Chase Bank
• Litton Loan Servicing
• Navy Federal Credit Union
• Ocwen Financial Corporation
• OneWest Bank
• PNC Bank, National Association
• Saxon Mortgage Services
• The Golden 1 Credit Union
• US Bank, National Association
• Wachovia Mortgage
• Wachovia Bank
• Wells Fargo Bank

You’ll notice that most of the big players are including on the list.

If a borrower is rejected for a loan modification through the HAMP Program, then you’d be eligible to apply to the HAFA Short Sale program.  HAFA will pre-approve the price of a short sale and give you 4 months to sell the property through a real estate agent.  The following guidelines apply:

• 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.
• Sellers who have government loans do not qualify.

There are several benefits for going through this tedious and time-consuming process.  Second lien holders can no longer try to demand payments outside of closing. Lenders that participate in HAFA waive the right to a deficiency judgment.  A deficiency judgement is a case where your lender could come after you after closing and still try to collect the money that is owed.  Second lien holders can receive up to 3% of the loan balance with a $3,000 maximum to release the lien.  First lien holders, your primary mortgage, will receive a payment from the government of up to $2,000 to approve the short sale.  You as the sellers will receive a payment of $3,000 at closing to cover some moving expenses.  Sellers will not be required to make a seller contribution, meaning you don’t have to shell out any of your own cash to close.  And lastly, lenders need to agree not to foreclose during the short sale process.