New Federal Guidelines for HAFA

The Treasury Department has established a new short sales program called the Home Affordable Foreclosure Alternatives Program or HAFA. HAFA is designed to streamline short sales by providing a uniform process and standard forms, as well as incentives for families and their mortgage servicers to complete the process. It offers homeowners who sell their homes under HAFA $3,000 to help cover their moving costs. HAFA may be able to help you through the difficult process of selling your home and moving to another home. This program covers a good majority of all the servicers we work with.

Mortgage servicers who participate in HAMP are required to see if you qualify for a loan modification before deciding if you qualify for HAFA. If you do not want to try a loan modification be sure to let your servicer know. To qualify, you must meet these basic eligibility requirements:

Benefits of HAFA

• HAFA streamlines the short sales and processes to make it easier for you to work with the servicer.

• You receive a check for $3,000 at closing to help with your moving costs.

• You will be fully released from future liability for your first mortgage debt (no cash contribution, promissory note or deficiency judgment is allowed). Also, any junior lien holder who accepts a HAFA incentive must also release you from future liability.

• The timeline requirements under HAFA are vastly improved. Under HAFA the borrower contacts the servicer and requests a short sale agreement upfront. The servicer then sends you a Short Sale Request.

1. In 14 days - Borrow must return request to the servicer.

2. In 30 days - The servicer must respond to the request after doing an evaluation of the home value and specific guidelines of the lender/investor. At this point, the servicer will give the borrower an approved minimum net amount that is acceptable.

3. In 3 days – The listing agent must submit a listing agreement with MLS listing and flyers.

4. In 7 to 14 days – You should have an accepted offer since the servicers usually give us a reasonable price to work with.

5. In 3 days – that offer must be submitted to the servicer by the agent.

6. In 10 days – Lender must approve, deny or counter !!

It is also acceptable to list and sell the home first and send it the offer and a short sale request in which case the servicer will still evaluate the transaction for 30 days then have 10 days to respond. This means you are less likely to lose the buyer who gets tired of waiting.

HAFA Eligibility

• The property must be your primary residence.

• The first lien (your first loan on your home) must have been originated before January 1, 2009.

• The mortgage must be delinquent or default must be reasonably foreseeable.

• The current unpaid principal balance may not be more than $729,750 (there are higher limits for 2- to 4-unit dwellings).

• Your total monthly payment must exceed 31% of your gross income. Even if you meet these threshold requirements, the servicer must consider your particular circumstances. Not everyone will qualify. Sometimes the owner of the mortgage has rules that mean you or your home may not be eligible. That’s why it is so important to work closely with the servicer. Loans that are owned or guaranteed by Fannie Mae or Freddie Mac will be eligible under HAFA, but only after they make changes to the rules to fit with their programs. This is expected to be around August 1, 2010. HAFA does not apply to FHA or VA loans but both entities have similar programs

IMPORTANT NOTE

A servicer represents the lender that now owns your mortgage. Ordinarily you send your monthly payment to the servicer and the servicer collects your payments and maintains financial records related to your loan. If you are late, they are the ones responsible for working with you to resolve the problem. The servicer is not necessarily the actual lender/investor for your mortgage

In a short sale, the servicer allows the homeowner to list and sell the mortgaged property even if the net proceeds from the sale turn out to be less than the total amount due on the loan. Under HAFA, you will have no further responsibility to the lender/investor.

Click here for a list of the servicers http://www.makinghomeaffordable.com/contact_servicer.html

Sections of this overview are from the National Association of Realtors - May 2010