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Understanding HAFA

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The government's Home Affordable Foreclosure Alternative (HAFA) Program is here ... and you need an advocate.

You may have heard it before, but now it’s taking effect: our federal government is actively trying to combat the millions of foreclosures happening across the country. To address this need for new options, an initiative is in effect: called the Home Affordable Foreclosure Alternative Program, or HAFA. While the details of what this means to the government, lenders, servicers and agents are complicated, you the homeowner, need to clearly understand the new solutions available to you.

This report provides a straight forward explanation of HAFA and, more Importantly, what it means to you.

First, what is HAMP?

The Home Affordable Modification Program (HAMP) was introduced in March of 2009 to assist homeowners whose mortgage payments were too high for their income levels (more specifically, those exceeding 31 percent of income).

For homeowners whose mortgage payments are only slightly out of reach, HAMP can lower the payments, allowing them to stay in their homes. Unfortunately for most homeowners facing financial hardship, HAMP can't offer a large enough mortgage reduction, so most who enter the program don't qualify or end up defaulting on the modified mortgages.

Whether through government programs or your lender, this can be a difficult process to understand. Please contact Karen Arbutine & Associates at 888.727.7778 if you would like to find out if you qualify for a loan mortgage modification.

Ok, so what is HAFA?

HAFA, or Home Affordable Foreclosure Alternatives, is the governments newest program put in place to benefit homeowners who do not qualify for HAMP assistance. Released on April 5th 2010, this program is designed to expedite foreclosure avoidance options for homeowners in need. By promoting the swift execution of a short sale or deed-in-lieu, HAFA can potentially save millions of homeowners from the financially devastating event of foreclosure.

What is a short sale?

In a short sale, the property is sold for less than the mortgage amount in order to avoid the foreclosure process.

What is deed-in-lieu?

In a deed-in-lieu of foreclosure, the property is given fully to the lender because the homeowner can no longer make payments, and the property is then sold to retrieve part of the loan balance owed.

SPECIFICS

In order to qualify for the HAFA program, you first have to meet the initial HAMP criteria.

You must:

  1. Be delinquent on your mortgage or face Imminent risk of default
  2. Occupy the property as your primary residence
  3. Have a mortgage originated on or before January 1, 2009
  4. Have an unpaid principle balance no greater than $729,750 for a one-unit property
  5. Have total monthly mortgage payments exceeding 31 percent of your gross income.

If you meet the above criteria, but a mortgage modification still leave you with an unaffordable mortgage, HAFA becomes your primary solution to avoid foreclosure, salvage your credit score and move on with dignity through a short sale or deed-in-lieu.

SPECIFICS

HAFA only applies to loans that are not owned or guaranteed by Fannie Mae or Freddie Mac. A HAFA short sale or deed-in-lieu only applies to first lien mortgage loans, but the program does offer lender incentives to assist homeowners who have multiple mortgages on their property.

How can HAFA help me?

HAFA can potentially save you a lot of grief and heartache by creating standardized processes and setting limits on how long a lender can wait to respond to short sale request. Currently, short sales can be lengthy transactions, making it difficult for potential buyers of your home to remain in the process.

The program requires participating lenders to determine what they are willing to accept before dealing with a short sale request-- similar to other pre-approval processes. This is so the lender can’t abruptly change how much money it wants to receive from the short sale. The fewer curve balls a lender can throw the better.

HAFA also benefits homeowners by stopping a lender’s ability to pursue deficiency judgement after a short sale or deed-in-lieu has been complete.

SPECIFICS

A deficiency judgement is an action taken against a debtor or barrow whose foreclosure sale or short sale did not cover the entire mortgage debt owed to the lender. A leander’s ability to pursue this course depends on the conditions of the original loan.

Prohibition of a deficiency judgment means your lender can't come knocking on your door to collect the portion of the mortgage not covered by the transaction. Such protection allows you to more quickly regain financial stability and move on with your life.

Homeowners may also receive $3,000 incentive upon completion of a short sale.

Why are lenders participating?

HAFA offers lenders an incentive of up to $6,000 for successfully processed short sale or deed-in-lieu. The lenders are not permitted to charge you the homeowner any processing fees or out-of-pocket expenses, and this incentive is given to them in exchange for that limitation.

The truth is a select few lenders and mortgage servicers may not participate in the HAFA program. But despite this, a lender almost always loses more money in a foreclosure than in a short sale or deed-in-lieu. If a lender in convinced that a homeowner has no way of paying the current mortgage, they will be concerned with salvaging as much of their investment as possible, so short sales are generally the best option for them as well.

What if my agent can’t fins a buyer for my home?

If you attempt a short sale under HAFA and a transaction does not close by the program deadline, the lender will receive your deed-in-lieu of foreclosure. This will provide effectively the same result for you, since wither way you will have a more positive solution to foreclosure, your mortgage debt will be forgiven, your credit score will be salvaged, and you will receive the $3,000 incentive to help with moving costs.

Which lenders are currently participating?

Generally speaking, lenders who participate in HAFA are also participating in HAMP. As a CDPE, I can always provide you the most up-to-date list of lenders participating in HAFA.

A current list of participating lenders at: http://www.makinghomeaffordable.gov/contact_servicer.html

There is a lot to understand about this program and many aspects of it are likely to change. As a CDPE, I keep close attention to the change as they happen, so that your can get the most relevant, current information, and the best possible service. If you would like to find out more about the HAMP or HAFA programs, real estate Lake Mary Florida or if some one you know needs assistance in avoiding foreclosure, please don’t hesitate to contact Karen Arbutine & Associates today at 888.727.7778.

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