As a way of helping distress home owners the government introduced what is known as the HAFA (Home Affordable Foreclosure Alternatives) Program. It is desigtned to give home owners who are in danger of having their home foreclosed options that will keep them out of foreclosure.

The program makes shortsales or deeds-in-lieu of foreclosure an option that will not destroy the credit of the borrower. It also offers financial incventives for eligible participants including $3000 for the participant to offset relocation expeneses.

HAFA is designed for borrowers who have tried HAMP (Home Affordable Modification Program), but who were not successful at getting a loan modification. The borrower must  meet HAMP’s  criteria (primaryl residence, first-lien mortgage, frequent or long term delinquency, unpaid balance under $729,750, and a house payment over 31 percent of gross income).

Borrowers must be considered HAFA inside of 30 days if they are cannot meet HAMP’s regulations or if the borrower requests to be considered for HAFA. Theborrower only gets fourteen days to respond to a written notification that HAFA is available to them, this is to give the 30-days to meet their deadline.

This is very much like with deeds in lieu or shortsales the lender must approve the borrower and appraise the property to be sure that the borrower qualifies. The lender must also agree to accept the sale price as payment in full even if it does not pay off the original loan amount. The lender also must agree to waive their right to action against the borrower for the deficiency.

When the borrower has a second mortgage or HELOC (Home Equity Line Of Credit) or something similar it is up to the lender or servicer of the first-lien if they or the homeowner negotiate with any secondary lienholders. There are cash incentives for the second lien holder to settle the debt and release the borrower from liability, but it is up to the lien holder.

HAFA has not less then 120 days to complete the transaction up to 12 months. HAFA requires that all sales must be “arms-length”, the buyer must hold the property for 90 days, and Realtors are entitled to a six percent coimmission upon a successful.

A short sale is any sale of property, usually during the foreclosure process, in which the lender(s) agrees to accept less than the balance due on the mortgage(s) or lien(s) in order to avoid the cost of foreclosure. Per HAFA requirements, the primary lender may not pursue the homeowner, but the secondary lenders do not have to agree to that provision. Assuming that they agree to the short sale in general, they can forego the financial incentive to waive collection rights and continue to pursue the homeowner for their own balances due, in which case their recovery options are then covered by state law. The vacancy date is determined by the terms of the closing.

Unlike a short sale, a deed-in-lieu simply allows the homeowner in default to transfer the deed to the property back to the lender in exchange for partial or full payoff of the mortgage. The vacancy date must be at least 30 days after the deed-in-lieu agreement is signed.

HAFA requires that all foreclosure sales be put on hold in good faith, pending the outcome of a shortsale or deed-in-lieu of forclosure. In the case of a short sale, the lender also must agree to pay the administrative closing costs.

All HAFA agreements must be finalized and signed by December 31, 2012.

Download the Treasury Dept’s Supplemental Directive 11-10 for more specific details and samples of forms to be used in processing HAFA transactions.

If you are behind on your mortgage be proactive in researching your options you might save your credit and get paid to move out of the home. I can help call me at 479-640-8375 or email me at CodyBurnettRealtor@gmail.com.