In a continuing effort to reduce the number of homes going to foreclosure, yesterday the administration, thru the Department of Treasury, released a new supplemental directive outlining incentives for short sales and deeds-in-lieu (DILs) under the Home Affordable Modification Program (HAMP). The directive outlines the eligibility, underwriting and service requirements associated with The Home Affordable Foreclosure Alternatives Program (HAFA). The program was initially announced in May but was delayed over legalities involved in the process and the rights of second lien holders regarding claims on the property.
Who Qualifies for the HAFA Program?
- Borrowers who do not qualify for a trial-period plan or do not successfully complete the trial-period plan
- Borrowers that are delinquent on a HAMP modification
- Borrowers that request a Short Sale or Deed In Lieu of Foreclosure
The HAFA Program Outline:
The servicer determines that the homeowner does not qualify for a loan modification. The servicer has 30-days to consider the borrower for the program. Each participating servicer is required to develop a written policy, consistent with investor guidelines, that describes the basis on which the servicer will offer the HAFA program to borrowers. Every potentially eligible borrower must be considered for HAFA before the borrower’s loan is referred to foreclosure or the servicer allows a pending foreclosure sale to go through. The servicer must assess the current value of the property, independent of the borrower, and any other parties to the transaction. No payment for the valuation can be assessed in advance of the sale. Borrowers who qualify will be given pre-approved short sale terms before the property is listed, and once an offer is made, mortgage servicers have 10 days to approve or reject the sale. The program becomes effective April 5, 2010, but participating servicers may elect to implement the program earlier.
HAFA Program benefits to Servicers:
The program offers servicers $1,000 for each completed short sale or deed-in-lieu of foreclosure. Upon agreement with the primary investor, subordinate lien holders will be paid up to $3000 of the short sale proceeds to release their claims on defaulted properties. For this concession, the investor will also receive up to $1,000 from the Treasury. If the second lien holder wants more than the $3,000 cap to relinquish their stakes, they can pursue a short sale outside of the federal program.
HAFA Program benefits to Homeowners:
Homeowners who agree to a short sale or deed-in-lieu of foreclosure will get up to $1,500 for relocation. In addition, the homeowner will be “fully released” from any future liability.
HAFA Program benefits to Realtors:
The new program does not allow servicers to mandate that short sale agents and brokerages must reduce their commissions in order to approve the transaction.
Potential Pitfalls in the HAFA Program:
- Borrowers need to be eligible for the Home Affordable Modification Program (HAMP) in order to participate in the HAFA program.
- The program does not take effect until April 2010.
- The program is not mandatory, each servicer has the option to participate or not.
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If you’re a homeowner facing a pending foreclosure, the government’s Home Affordable Modification Program (HAMP) and its complementary Home Affordable Foreclosure Alternatives (HAFA) program could be your saving grace. However, it will take some effort on your part to reap the benefits of such programs.
First of all, you’ll need to call your mortgage company to find out if they participate in HAMP. If they do, you’ll have to gather information such as your latest tax return, your last two pay stubs, a W-2, a monthly mortgage statement, and an explanation of why you are in need of assistance. You’ll also need to fill out an affidavit form. You can find this form, as well as more information about the HAMP and the HAFA program at http://www.makinghomeaffordable.gov. You can also get free assistance from a certified housing counselor by calling the Homeowner’s HOPE Hotline at 1-888-995-HOPE.
When gathering your documents, make sure you make copies of all of your paperwork and keep the originals whenever you can. Put your name and loan number on all your documents, and keep a record of what you’ve sent and when you sent it. When mailing documents, it might be worth a little extra money to send them via certified mail. If you can manage to send them all at once, you’ll only incur the one-time extra charge.
Homer Gomingway
http://www.gohoming.com