Sunday, August 8, 2010

Home Affordable Foreclosure Alternatives Program Update

The Home Affordable Foreclosure Alternatives (HAFA) Program, a part of the HAMP program, provides additional options to avoid costly foreclosures and offers incentives to borrowers, servicers and investors who utilize a short sale or deed-in-lieu (DIL) to avoid foreclosures. HAFA alternatives are available to all HAMP-eligible borrowers who: 1) do not qualify for a Trial Period Plan; 2) do not successfully complete a Trial Period Plan; 3) miss at least two consecutive payment during a HAMP modification; or, 4) request a short sale or deed-in-lieu.

HAFA has been revised effective April 5th, 2010 in Supplemental Directive 09-09, replacing original Supplemental Directive 09-01.

In a short sale, the servicer allows the borrower to list and sell the mortgaged property with the understanding that the net proceeds from the sale may be less than the total amount due on the first mortgage. Generally, if the borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the servicer - provided title is free and clear of mortgages, liens and encumbrances. With either the HAFA short sale or DIL, the servicer may not require a cash contribution or promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower.

HAFA simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation. A loan must be HAMP eligible and meet other requirements to be eligible for incentive compensation. Among the requirements: The property must be borrower's principal residence and the loan was originated on or before January 1,2009. The program sunsets December 31, 2012.

The borrower may receive a one-time payment of $3,000 in the month the Short Sale/DIL Loan Set Up transaction is received after the closing has occurred.

The guidelines for HAFA are detailed further in the documents found here:

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