What is HAFA - Home Affordable Foreclosure Alternatives Program

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 took effect on April 5, 2010 and sunsets on December 31, 2012.

Home Affordable Foreclosures Alternatives Program: Guidelines and Forms

(https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.jsp)

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:

(http://www.makinghomeaffordable.com/contact_servicer.html)

  • 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).
  • 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 the following financial incentives:
          1.  $3,000 for borrower relocation assistance;
          2.  $1,500 for servicers to cover administrative and processing costs
          3.  Up to $2,000 for investors who allow a total of up to $6,000 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.

Ammendments to HAFA Issued December 28, 2010

On December 28, 2010, the Treasury Department released an update to the Home Affordable Foreclosure Alternatives Program (HAFA).  The changes will increase the number of eligible borrowers who may participate in the program and should expedite approvals:

1.  A borrower's reason for relocation no longer needs to be connected to employment nor be of a certain distance from the property.  Borrowers may have moved up to 12 months before certain dates in the HAFA process but may not have purchased another home.

2.  Servicers are not required to determine if the borower's total monthly mortgage payment exceeds 31% of gross income.  Borrowers will still be required to show a hardship.

3.  Servicers are now required to communicate approval, disapproval, or a counter offer no later than 30 calendar days after receiving an (i) executed sales contract, (ii) Alternative Request for Approval of Short Sale, and (iii) a signed Hardship Affidavit.

4.  If an unsolicited borrower requests HAFA, the servicer has 30 calendar days to determine the borrower's eligibility and, if eligible, send the borrower the Short Sale Agreement.

5. HAFA will no longer impose a 6% cap on payments to each subordinate mortgage/lien holder.  The $6,000 aggregate limit is still in effect.

The update also clarifies vendors of the servicer may not be paid from the real estate commission.  Servicers must implement the changes by February 1, 2011.