What is HAFA?
The Home Affordable Foreclosure Alternatives (HAFA) Program is a government-sponsored initiative overseen by the US Treasury Department and administered by Fannie Mae assisting all Home Affordable Modification Program (HAMP)-eligible homeowners in avoiding foreclosure, specifically through Colorado short sales or deeds-in-lieu of foreclosure. HAFA was announced on November 30, 2009 in a HAMP Update titled Introducing the Home Affordable Foreclosure Alternatives Program.
HAFA directs lenders to assist eligible homeowners in quickly and effectively implementing short sales or deeds-in-lieu by providing financial incentives to lenders that carry out foreclosure alternatives through the program's guidelines set forth in Supplemental Directive 09-09 Revised (revised March 26, 2010). The program was introduced in part with the intent to remove the stigma from short sales and help keep communities from being destroyed through massive foreclosures. HAFA in its current state is only applicable to conventional-type, non-Governmental Serviced Enterprises (non-GSE) mortgages and therefore does not apply to loans owned or guaranteed by Fannie Mae or Freddie Mac.
Details of HAFA
HAFA was introduced to simplify and streamline the short sale process. HAFA accomplishes this in the following ways:
• Compliments HAMP by providing viable alternatives for borrowers who are HAMP-eligible
• Uses standard processes, documents and timeframes
• Provides financial incentives to borrowers, servicers and investors
• Requires that borrowers be fully released from future liability for the debt
• Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis
• Allows the borrower to receive pre-approved short sale terms prior to the property listing
• Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement
HAFA provides financial incentives as follows:
• Homeowners qualify for $3,000 (updated March 26, 2010; was previously $1,500) in Borrower Relocation Assistance after a short sale or deed-in-lieu has been completed (may classify as taxable income in some cases)
• Financial incentives for servicers participating in the program include up to $1,500 (updated March 26, 2010; was previously $1,000) servicing bonus upon completion of a Colorado short sale or deed-in-lieu
• Financial incentives for investors include up to $2,000 (updated March 26, 2010; was previously $1,000) for those who allow a total of up to $6,000 in Colorado short sale proceeds to be distributed to subordinate lien holders. This reimbursement will be earned on a one-for-three matching basis
• Lenders pay all servicing fees — homeowners have no out-of-pocket expenses
Who is Eligible for HAFA?
Most homeowners facing financial hardship are eligible. As a rule, if a homeowner is eligible for HAMP but cannot pay the mortgage, then he or she is eligible for an assisted short sale through HAFA. However, loans owned or guaranteed by Fannie Mae or Freddie Mac do not qualify. Servicers must consider possible HAMP eligible borrowers for HAFA within 30 calendar days if the borrower has met one or more of the following criteria:
• Does not qualify for a HAMP Trial Period Plan
• Does not successfully complete a HAMP Trial Period Plan
• Is delinquent on a HAMP modification by missing at least two consecutive payments
• Requests a short sale or deed-in-lieu
For a loan to qualify, it must meet the following criteria:
• The property is the borrower's principal residence
• The mortgage loan is a first lien mortgage originated on or before January 1, 2009
• The mortgage is delinquent or default is reasonably foreseeable
• The current unpaid principal balance is equal to or less than $729,750
• The borrower's total monthly mortgage payment exceeds 31 percent of the borrower's gross income (as defined in HAMP Supplemental Directive 09-01)
• The mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac
Colorado HAFA Short Sale FAQ's
What does HAFA stand for?
Also known as the "April Program," HAFA stands for Home Affordable Foreclosure Alternatives. It's a brand-new government program that began on April 5, 2010, aimed at streamlining and incentivizing alternatives to foreclosure.
What are the "Alternatives" in HAFA?
HAFA provides two alternatives that will allow you to avoid foreclosure:
·Short Sale– If you owe more on your home than it is now worth, a short sale will help you sell your home and save yourself from financial ruin. According to HAFA, a real estate agent must be involved in this process.
·Deed-In-Lieu– This is where the bank accepts the deed of your home instead of ("in-lieu of") foreclosure. You do not get to keep your home, but your mortgage debt is forgiven.
HAFA also provides up to $3,000 in Borrower Relocation Assistance to help you transition beyond a Colorado short sale or deed-in-lieu of foreclosure.
Why should I consider a HAFA short sale?
HAFA sets distinct guidelines and incentives for banks and lending companies so that you will know whether or not you can complete a Colorado short sale. One of the common myths of a short sale is that they take forever to complete. HAFA makes sure that short sales happen more quickly by streamlining the short sale process.
How is HAFA different from a Colorado short sale?
The main issue with traditional short sales was that they took too long, and it was difficult to keep buyers interested in the process. HAFA is a program designed to speed up the short sale process and even gives banks incentives for each short sale they do. Also, after completing a HAFA short sale, you may be given up to $3,000 in Borrower Relocation Assistance to help you transition. During a non-HAFA Colorado short sale, there is no government incentive for banks to help you.
Do I have to hire a real estate professional for a HAFA short sale?
Yes, but it doesn't cost you anything. Under HAFA, the Westfall and Company's professional's fees may be deducted from the sale proceeds. It is a requirement of a HAFA Colorado short sale that you work with a real estate professional to help you through the process.
How do I get started?
Your first step should be to contact an educated real estate professional in your area. An agent can walk you through the HAFA process, determine your eligibility, and provide you with the best solutions available for your particular circumstances.
How do I qualify?
Most homeowners facing financial hardship can qualify for HAFA. If you applied for a HAMP Trial Period Plan but did not qualify, or were unable to complete the Trial Period Plan, you are definitely eligible for HAFA.
What's in it for me?
HAFA is the only program that gives you cash for avoiding Colorado foreclosure through a short sale or deed-in-lieu of foreclosure. If you complete a short sale or deed-in-lieu, then up to $3,000 in Borrower Relocation Assistance may be available to aid in your transition. The biggest gain of HAFA, however, is that it helps you get your life back if you feel like there are no other solutions when faced with foreclosure.
How long does the process take?
HAFA speeds up the Colorado short sale process by putting in place distinct timelines that the banks — and you — must follow. Each step of the process has a defined amount of days in which it must happen. This keeps everyone on track. The longest minimal time expected in the HAFA short sale process is five months. However, the term of the SSA may be extended at the discretion of the servicer up to a total term of 12 months if agreed to by the borrower, in accordance with the requirements of the investor.
There are many people out there trying to scam homeowners by requesting up-front fees for HAFA short sales. This is fraud. MakingHomeAffordable.gov (MHA) provides the following guidelines:
·Beware of anyone who asks you to pay a fee in exchange for counseling service or modification of a delinquent loan.
·Scam artists often target homeowners who are struggling to meet their mortgage commitment or anxious to sell their homes.
·Beware of people who pressure you to sign papers immediately, or who try to convince you that they can "save" your home if you sign paperwork or transfer over the deed to your house.
·Never make a mortgage payment to anyone other than your mortgage company without their approval.
·Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
What is foreclosure?
If you are in a financial hardship or cannot make payments on your home, the bank can take your home away from you through a foreclosure, which leaves your credit horribly damaged, your security clearance compromised (if applicable), challenges your present and future employment, and you may still owe money to the bank. It's a nightmare situation that has been happening to millions of Americans.
What are the tax considerations of a HAFA short sale or deed-in-lieu?
The difference between the remaining amount of principal owed and the amount that the servicer receives from the sale must be reported to the Internal Revenue Service (IRS) on Form 1099C, as debt forgiveness. In some cases, debt forgiveness could be taxed as income. The $3,000 Borrower Relocation Assistance may also be reported as income. A short sale may have income tax consequences and/or may have a derogatory impact on your credit score.
In the case of a deed-in-lieu, the difference between the remaining amount of principal you owe and the current market value of the property must be reported to the Internal Revenue Service (IRS) on Form 1099‐C as debt forgiveness. In some cases, debt forgiveness could be taxed as income. The $3,000 Borrower Relocation Assistance may also be reported as income.
Why would banks want to participate in HAFA?
Foreclosures are costly and expensive for banks. When a bank forecloses on a home, they become responsible for selling it. It's difficult for banks to sell foreclosed homes (banks are not in the business of buying or selling homes). HAFA provides a streamlined set of guidelines for banks and homeowners to do short sales—the best alternative to a foreclosure. Additionally, HAFA provides financial incentives to banks to participate in HAFA.