HAFA Short Sale – $3000 Back

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HAFA is a program primarily designed for homeowners who are unable to keep their home even with a loan modification under the Home Affordable Modification Program (HAMP). With HAFA, homeowners may be able to avoid a foreclosure by selling the home as a “short sale” where the value of the home is less than the remaining amount of the mortgage or by transferring title to the lender through a process called a “deed-in-lieu of foreclosure.

Home Affordable Foreclosure Alternatives (HAFA) Program on November 30, 2009. An updated version was released on March 26, 2010 while the program officially went into effect on April 5, 2010. On December 28, 2010, the program was re-updated with some changes. Fannie Mae and Freddie Mac have separate HAFA guidelines with some modifications.

 

HAFA Key Points

  • Complements HAMP by providing a viable alternative for borrowers who are HAMP eligible to but are still unable to keep their home.
  • Uses borrowers financial and hardship information already collected under HAMP
  • Provides an alternative for HAMP eligible borrowers who are unsuccessful with past programs
  • Limits the amount of time a lender is given to respond to a short sale offer
  • Limits the claims made by subordinate lenders
  • Allows payments to subordinate mortgage/lien holders
  • Implements alternative deed in lieu program
  • Processes financial information through HAMP
  • Applies to first lien holders(non GES mortgage)
  • Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consisting with investors’ guidelines
  • The program ends on December 31, 2012

 

Requirements For Qualification

  • The loan must be the first mortgage.
  • The loan transaction should have taken place before January 1, 2009.
  • The borrower does not have to be in default.
  • The property must be the borrowers primary residence
    • If the property has been vacant for or rented for 12 month or less prior to the date of the ( Short Sale Agreement) SSA, Approval of Short Sale (RASS), or Deed in Lieu ( DIL) agreement ,it is still eligible for HAFA
    • The borrower must prove the property was their principal residence prior to relocation and they have not purchased a one to four unit property within the 12-month range.
    • The borrowers reason for relocating is not job related
    • There is no minimum distance required for the relocation
  • The unpaid balance must be less to $729,750
  • Borrower’s monthly payment most not be less than 31% of homeowners monthly income.
  • The loan must not be an FHA or VA loan
  • The homeowner must be behind in payments or have a conviction of future non-compliance.

 

What Are the Benefits?

  • Financial incentives are available to borrowers, lenders and servicers.
    • Borrowers receive$3,000, which is deducted from the gross sale proceeds at close, towards relocation cost.
    • Servicers receive $1,500 to cover administrative and processing cost
    • Investorsare given up to $2,000 for allowing a portion of the short sale proceeds.  No more than $6,000 to be distributed to subordinate lien holders
      • In order to receive this incentive, an investor must agree to waive all future claims against the borrower.
      • For every $3,000 an investor pays to secure a release of a subordinate lien (up to $6,000), the investor is given $1, up to the maximum of $2,000
      • The servicer on behalf of the investor will determine the amount or percentage of the unpaid principal balance of the lien that will be paid to each subordinate lien holder, in order of priority, up to the $6,000 aggregate cap. How this subordinate lien would be paid should be included in the servicer’s HAFA Policy.
  • The borrower is not liable for the debt that is forgiven at any time in the future
  • The servicer cannot charge the borrower for processing fees of any kind and is required to pay all out of pocket expenses
  • Foreclosure is avoided, which in most cases is an advantage to all parties.
  • Depending upon the lender, additional borrower incentives may be available.
  • The borrower can receive pre-approved short sale terms, prior to the property’s listing.

 

Determination of Eligibility and Notification

Servicer must consider HAMP eligible borrowers within 30 calendar days after the borrower satisfies the following conditions

    • Does not qualify for a HAMP trial period plan
    • Does not successfully complete a HAMP trial period plan
    • Is delinquent on a HAMP modification(must have missed at least 2 consecutive payments)
    • Requests a short sale or Deed in Lieu (DIL).

The servicer will provide a written policy in which he will describe the basis on which the HAFA be offered to the borrowers. The servicer must furnish the borrower, in writing, information about the availability of a short sale or deed in lieu. The servicer must give the borrowers 14 calendar days after the solicitation to contact the servicer with their interest either in writing or orally, if the borrower does not respond, that end the servicer’s duty to give a HAFA offer. The servicer provides the borrower the following documents if the borrower is interested in the HAFA offer- – Short Sale Agreement(SSA) – Request for Approval of Short sale(RASS)

 

Short Sale Agreement (SSA)

If the borrower is interested in a short sale, the servicers will fill out the Short Sale Agreement (SSA) and send it to the borrower. The borrower has 14 calendar days from the day of the SSA to sign and return it to servicer. The real estate broker must also sign the SSA. The SSA must give the borrower an initial period of 120 calendar days to sell the house. The servicer may also extend up to 12 months, if accepted by the borrower.

 

Request for Approval of Short Sale

Within three (3) business days of receiving an executed sale contract, the borrower or real estate agent must submit a completed Request for Approval of Short Sale (RASS) to the servicer, including

    • A copy of sale contract
    • Buyer documentation of funds or pre-approval/commitment letter from a lender
    • All information on the status of subordinate lien and/or negotiations with subordinate lien holders

 

Servicer Approval

Within 10 business days after the servicer receives the RASS and all required attachments, the servicer must approve or deny the request and advice the borrower with a statement of reasons in a case of disapproval. The servicer may require the closing to take place within a reasonable period after it approves the RASS, but not sooner than 45 calendar days from the date of sales contract unless the borrower agrees.

 

Things You Must Know

    • The deal must be “arms length”. Borrowers cannot list the property or sell it to a relative or anyone else they have a close personal or business relationship.
    • The amount of debt forgiven might be treated as income for tax purposes. Under a law expiring at the end of 2012, however, forgiven debt will not be taxed if the amount does not exceed the debt that was used for acquisition, construction, or rehabilitation of a principal residence.
    • The servicer will report to the credit reporting agencies that the mortgage was settled for less than full payment, which may hurt credit scores.
    • Buyers may not resell the property for 90 days
    • banks which have accepted TARP funds and are participating in the HAMP program must also offer the HAFA alternative. Click here  for a list of banks that participate in HAFA program

External Link

Government sites and more with additional information on HAFA:

https://www.hmpadmin.com/portal/programs/docs/hafa/sd0909r.pdf

http://www.realtor.org/government_affairs/short_sales_hafa

https://www.efanniemae.com/sf/servicing/hafa/
http://hafa-program.com/