Short Sales Update

Treasury Department Announces Home Affordable Foreclosure Alternatives Program

 

On  November  30,  2009,  the  Treasury  Department  released  guidelines and  forms  for its new Home Affordable Foreclosure Alternatives Program (HAFA).  HAFA is part of the Home Affordable Modification Program (HAMP). Under HAMP, the servicers apply a uniform loan modification process to provide eligible borrowers with sustainable monthly payments for their first lien mortgage loans.  HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure.  Customers can opt this program to avoid foreclosure on a loan eligible for modification under the HAMP program.  HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks. HAFA is a complex program, with 43 pages of guidelines and
forms, designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure.

Several important facts about HAFA:

- Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.

- Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.

- Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

- Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).

- Uses standard processes, documents, and timeframes/deadlines.

- The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements.

- The program sunsets on December 31, 2012.

For more information visit the links below:

www.realtor.org/shortsales

https://www.hmpadmin.com/portal/docs/news/hampupdate113009.pdf

https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf