In 2009, the Treasury Department introduced the HAFA program to provide a viable option for homeowners who are unable to keep their homes through the existing Home Affordable Modification Program (HAMP). The HAFA program takes effect on April 5, 2010—although some servicers may implement it sooner, if they meet certain requirement--and sunsets on December 31, 2012.
Home Affordable Foreclosures Alternatives Program: Overview
HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. Servicers participating in HAMP are also required to comply with HAFA. A list of servicers participating in HAMP (including HAFA) is available at:www.makinghomeaffordable.com/contact_servicer.html.
Forms and Guidelines
The HAFA Program is complex and includes many guidelines and forms designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure. Original guidelines were released in September 2009, but some portions (Exhibits A and B) were revised in March 2010. For an overview of the guidelines, see:
Current HAFA forms, guidelines, and FAQs-- included in Supplemental Directive 09-09--as of March 12, 2010:
Issued: November 30, 2009, Exhibits A and B, revised 3/12/2010, see below for current form
HAFA Provisions
- Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
- Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
- Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
- Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).
- Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
- Uses standard processes, documents, and timeframes/deadlines.
- Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).
- Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.
Source: NATIONAL ASSOCIATION of REALTORS® | Headquarters: 430 North Michigan Avenue, Chicago, IL 60611 DC Office: 500 New Jersey Avenue, NW, Washington, DC 20001-2020 I 1-800-874-650
