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HAFA Short Sale Fact Sheet

The California Association of Realtors has published the following fact sheet for the Home Affordable Program Foreclosure Alternative ( "HAFA" ), which is a government program which provides incentives and guidelines to participating lenders to encourage them to work with borrowers who are delinquent on their loans: Note that I have modified this fact sheet for recent changes to the original HAFA program ( see my recent blog entry Changes to Home Affordable Foreclosure Alternatives Program ("HAFA") Guidelines )

What is HAFA? 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.
Eligibility The eligibility requirements for a HAFA short sale include the following:
 

· Property must be borrower's principal residence;

 

· Loan must be a first trust deed originated before 2009;

 

· Loan must be delinquent or default must be reasonably foreseeable;

 

· Current unpaid principal balance must be $729,750 or less for single-family home (or higher amounts for 2-to-4 units); and

 

· Borrower must be eligible for, but unable to complete, a loan modification under the Home Affordable Modification Program (HAMP).

Financial Incentives The government incentives under HAFA are as follows:
 

· $3,000 to borrower for relocation expenses;

 

· $1,500 to servicer for each successful short sale; and

$1 to investor for every $3 paid to extinguish junior liens, up to $2,000 maximum.
Effective Dates April 5, 2010 to Dec. 31, 2012.
HAFA Procedures The general standardized procedures for HAFA short sales are as follows:

Step 1: Lender evaluates borrower for a loan modification under HAMP.
 
Step 2: Lender evaluates borrower unable to complete HAMP modification for short sale.
 
Step 3: Lender issues Short Sale Agreement (HAFA SSA).
 
Step 4: Borrower lists the property for sale using a licensed real estate agent.
 
Step 5: Borrower and agent market and sell the property.
 
Step 6: Borrower submits to lender a Request for Approval of Short Sale (RASS).
 
Step 7: Lender approves RASS within 10 business days.
 
Step 8: Sale closes escrow.
Lender's Evaluation  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.
Short Sale Agreement (HAFA SSA) The Short Sale Agreement (HAFA SSA) will include, among other things, the following:
 

· Either a list price or net proceeds acceptable to the lender;

 

· An agreement to fully release borrower from all liability for repayment of the loan;

 

· An agreement not to complete a foreclosure sale if borrower complies with SSA;

 

· Amount of acceptable closing costs and up to 6% real estate commission.

 

· Notice that the sale must be an arm's length transaction; and

 

· Notice that the buyer must agree not to resell the property within 90 days of closing.

Tax, Credit, and Other Consequences A HAFA short sale may 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.
Participating Lenders A list of lenders participating in the HAMP program is available at http://makinghomeaffordable.gov/contact_servicer.html. Fannie Mae and Freddie Mac have their own HAFA guidelines for their loans.
More Information See Supplemental Directive 9-09 ( Revised )

For more information about Palos Verdes and South Bay Real Estate and buying and selling a home on the Palos Verdes Peninsula, visit my website at http://www.maureenmegowan.com . I try to make this the best real estate web blog in the South Bay Los Angeles and the Palos Verdes Peninsula. I would love to hear your comments or suggestions.

Comment balloon 5 commentsMaureen Megowan • April 13 2010 10:20PM

Comments

Maureen: this is most valuable information. Great to have some alternative to avoid foreclosure.

Posted by LLoyd Nichols, SW Florida Homes (Premier Florida Realty of SWFL) almost 9 years ago

maureen,

Thanks. This is very helpful. Good information in concise format. Will have to figure how to copy it and hang on the wall.

Posted by Jon Zolsky, Daytona Beach, FL, Buy Daytona condos for heavenly good prices (Daytona Condo Realty, 386-405-4408) almost 9 years ago

Maureen, HAFA explained! Thanks for posting this. I'm with John, this one is going on the wall! :)

Posted by Sharon Alters, Realtor - Homes for Sale Fleming Island FL (Coldwell Banker Vanguard Realty - 904-673-2308) almost 9 years ago

Maureen, this is a fabulous outline! Great job by you, for providing such clarity to the guidelines! Thank you!

Posted by Don Wixom, "Looking out for your next move..."tm (RE/MAX Advantage Nampa, ID) almost 9 years ago

HAFA has been a big bummer, but we expected alot of this.  Hopefully the new guidelines will help some.  As one of the new HAFA program guidelines that went into effect Feb. 1st, 2011, the 31% debt to income ratio does NOT need to be proven by the borrower.  In other words, it is like a "stated income short sale" to some degree!  Pretty good news for the program.  We have a great discussion and info group for the HAFA short sale program, and we are releasing an updated HAFA guide next week as well - www.theshortsaleguide.com/group/hafaprogram

Posted by Mike Linkenauger, Short Sale Specialist Network about 8 years ago

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