HAFA – Home Affordable Foreclosure Alternatives
On April 5th, 2010 a new governmental program come into effect that may help thousands of homeowners avoid foreclosure, the Home Affordable Foreclosure Alternatives. Under this program, homeowners who do not qualify for a loan modification will be able to short sale their home or opt for a deed-in-lieu of foreclosure. The program is designed to aid homeowners eliminate the negative effects of a foreclosure on their credit and the possibility of a deficiency judgment by the lender after foreclosure.
The homeowner must qualify for the HAFA alternatives under the following criteria:
1. The HAFA program is required only for Fannie Mae and Freddie Mac owned or guaranteed loans.
2. Not qualify under the loan modification program or have defaulted under a loan modification.
3. The property must be the owner-occupied and a one- to four-unit home or condominium.
4. Have an unpaid principal balance that is equal to or less than:
a. 1 Unit: $729,750
b. 2 Units: $934,200
c. 3 Units: $1,129,250
d. 4 Units: $1,403,400
5. Have a first lien mortgage that was originated on or before January 1, 2009.
6. Have a monthly mortgage payment (including taxes, insurance, and home owners association dues) greater than 31% of your monthly gross (pre-tax) income.
7. Have a mortgage payment that is not affordable due to a financial hardship that can be documented
The benefits of a short sale or deed-in-lieu of foreclosure for a homeowner are that the homeowner will not only avoid a possible deficiency judgment by the lender but will also avoid any tax consequences that usually arise from a short sale or deed-in-lieu of foreclosure. The United States government has exempted the primary home of an individual from the tax that would normally be assessed on any forgiven debt by the lender until 2012 and therefore the HAFA provides an invaluable benefit to those homeowners who would like to take advantage of these foreclosure alternatives.
Other advantages of the HAFA program are: the program will finally standardize the short sale process by requiring standardized documentation from lenders such as the Short sale Agreement and Offer Acceptance Letter, allow borrowers a minimum number of days to market and sell the property – during which time no foreclosure sale can take place, provides incentives to lenders for successful completion of a short sale including contribution for paying junior lien holders, and pre-approval of the short sale before listing the property with a licensed real estate broker.
In addition, the HAFA program requires the homeowner to be fully released from any financial liability by the lender.
For more information on representation on a short sale, deed-in-lieu of foreclosure, you may contact our office or you may visit the Making Home Affordable website for free counseling help.
