Real Estate Insights

HAFA is a government-subsidized Home Affordable Foreclosure Alternatives program for distressed homeowners to sell their homes to avoid foreclosure, even if the sales price is not enough to pay off their existing mortgage loans. Under HAFA, a participating lender will pre-approve the terms of a short sale and give the borrower at least 4 months to market and sell the property using a licensed real estate professional.

Short sales involve the sale of real property when the outstanding loan balances owed against such a property are greater than the current market value of the property. Short sales involve much negotiation between the seller, their listing agent and the seller’s lenders, as well as much patience on behalf of the buyers during the short sale process.

Until recently, lenders have only had their own way to process short sales, but with the new HAFA program, the government hopes to provide lenders with a standardized process that will also provide additional incentives for the lenders if they choose to follow the program.

Eligibility

The HAFA program is not for everyone; homeowners looking to sell their home through this program must qualify and show a valid hardship. The property must also be the homeowner’s primary residence, their loan must have been originated prior to 2009, they must currently be delinquent on their mortgage or default must be reasonably foreseeable, the first mortgage balance cannot exceed $729,750, and the homeowner must be eligible for but unable to qualify for the Home Affordable Modification Program.

So how do you know if you really qualify?

If your mortgage is owned by Fannie Mae or Freddie Mac, then this program will automatically apply to your short sale request. To check whether your loan is owned by Fannie or Freddie please read this article: http://www.eaglehomegroup.com/WhoOwnsYourMortgage

If your loan is not owned by Fannie or Freddie, then it is up to your loan servicer and the investor who actually owns your mortgage. For a list of participating lenders please visit http://makinghomeaffordable.gov/contact_servicer.html

The only way to really figure out if you will be eligible for the HAFA program is to apply through your lender. Also each participating lender will have its own written policy for approving or rejecting a HAFA short sale, based on factors such as the severity of the loss, market conditions, the borrower’s motivation and cooperation, property valuation, and title review. 

How does it work?

Under the HAFA program, the government may provide the homeowner with up to $3,000 for relocation expenses, provide the loan servicers $1,500 for each successful short sale, and provide the actual investor behind the mortgage with up to $2,000 to use towards the payoff of any junior liens.

Once your lender has determined that your short sale request may qualify for the HAFA program, the lender will then provide you and your listing agent with instructions on how to complete a successful short sale. But, just because your lender approves a short sale request under the HAFA program does not mean that any junior lien holders must comply with the sale. Junior lien holders are still free to decide whether they will authorize a short payoff in return for releasing their lien from the subject property – which may or may not also include a release of liability from the loan as well.

An approved HAFA short sale may still have serious tax, credit, financial, legal, and other consequences.  A homeowner is strongly encouraged to seek the advice of a qualified professional regarding these consequences.

For more information on this program please visit the government’s website for the HAFA program at http://makinghomeaffordable.gov/hafa.html