How HAFA Can Help
The Home Affordable Foreclosure Alternatives (HAFA) Program was designed to work the Home Affordable Modification Program (HAMP) by helping current homeowners with mortgage debt who are eligible for HAMP but still cannot keep their home.
When a borrower applies for help from HAMP, not everyone succeeds with the program. Sometimes their lender is unable to approve a loan modification. Other times the borrower declines the terms of the loan modification. Some borrowers are approved and accept the terms of the modification, but fail to complete the program for various reasons. Before HAFA, these borrowers were usually headed for foreclosure.
HAFA gives those borrowers a viable alternative to foreclosure. If they have or want to find a buyer for their home, they may request approval for a short sale with pre-approval short sale terms and minimum acceptable net proceeds. If not, they may request approval for a deed-in-lieu. When a borrower applies for help with one of the HAFA solutions, the program already has their financial and hardship information from their HAMP application.
HAFA also imposes limits on the lender to help the borrower. Under the terms of this program, a lender must release the borrower from all future liability for the first mortgage debt. The lender may not ask the borrower for cash or a promissory note, and the lender may not ask a court for a deficiency judgment. The program also prohibits the lender from asking the listing real estate agent to discount their commission at the closing of a short sale.
All documents have been standardized and procedures, time frames, and deadlines have been streamlined under HAFA to make the process easier for both borrowers and lenders.
HAFA also provides financial incentives for both borrowers and lenders to participate in the program. Borrowers are entitled to receive $3,000 in relocation assistance, to be paid at closing. Lenders or loan servicers may receive up to $1,000 to help with administrative costs. There are also financial incentives for the lender or investor on the first mortgage to allow some of the proceeds from the sale of the property to be paid to subordinate lienholders.
Finally, participation in the HAFA program puts the foreclosure process on hold for the borrower. The lender may initiate the foreclosure process, but if the borrower is in the middle of the application process, or if any approved short sale or deed-in-lieu agreement has not been completed or reached its deadline, the lender may not complete the foreclosure process.