Many homeowners may feel that they can no longer afford their home, but want to avoid the negative effects of foreclosure. The Home Affordable Foreclosure Alternatives (HAFA) Program offers homeowners, their mortgage servicers, and investors an incentive for completing a short sale or deed-in-lieu of foreclosure. With these options, under HAFA, a homeowner leaves their home to transition to more affordable housing and alleviate the mortgage debt they owe.
Mortgage Is Owned Or Guaranteed By Fannie Mae Or Freddie Mac.
Borrower Is Delinquent Or Default Is Foreseeable.
Homeowner Demonstrates Hardship.
Borrower's Total Monthly Housing Payment Exceeds 31 Percent Of Gross Income.
Unpaid principal does not exceed $729,750.
According to HAFA rules, lenders now must offer a short sale in writing to the borrower within 30 days if the borrower does not qualify for or complete a loan modification. Borrowers then must respond within 14 days to the lender's short sale agreement.
When a purchase offer is made, borrowers must submit the sales contract to the lender within three days, along with the buyers' mortgage preapproval and the status of negotiations with other lien holders on the seller's property. Finally, lenders must approve or deny the contract within 10 days.
HAFA rules also state that lenders must release borrowers from the obligation to repay the difference between the sales price and the loan amount. No deficiency judgments are allowed for a first or second loan.
HAFA's financial incentives include a payment of up to $3,000 for second mortgage holders. Typically, holders of second loans are owed much more. But if the property goes to foreclosure, the second trust holder is not likely to get any money at all.
Other HAFA financial incentives include $1,000 to loan servicers to cover administrative fees, up to $1,000 for mortgage investors who agree to share short sale proceeds with second lien holders and $1,500 to the homeowners for relocation