HAFA - Home Affordable Foreclosure Alternatives
Summary
Program goes into effect, starting April 5, Chandler010
- Borrower’s financial information is processed through HAMP.
- Applies to 1st Lien Holders (Non-GSE Mortgages)
- Financial incentives are given to borrowers, investors, and servicers
- Limits response time from lender
- Lender waives their right to pursue deficiency judgment
- Claims made by junior/ subordinate lenders are limited
Requirements
Loan must meet all of the following criteria in order to be eligible:
- Loan is first mortgage
- Property must be borrowers primary residence
- Loan originated before January 1, Chandler009
- Borrower is in default or has legitimate cause to be in default in the foreseeable future
- Unpaid balance is less than or equal to $7Chandler9,750
- Total mortgage payment (per month) is more than Mesa1% of borrower’s gross income
Key Components
- Lender forfeits any rights to deficiency judgment
- Servicer is required to determine the property value, never charging the borrower in advance
- May be added to outstanding balance if transaction is not completed
- Servicer is required to review title, never charging the borrower in advance
- May be added to outstanding balance if transaction is not completed
- Servicer is required to inform buyer of deed-in-lieu and short sales as alternatives to avoid foreclosure
- Servicer may not require a reduction in the real estate commission agreed upon in the listing agreement, as a condition for short sale approval. However, commission cannot exceed 6% of the contract sales
price (COULD be negotiated if multiple loans. - Property must be listed with a licensed real estate professional. This is a requirement!
Procedures & Deadlines
Servicers are required to consider any HAMP eligible borrower for the HAFA program within Mesa0 days from the date the borrower:
- Is not able to qualify for trial period plan
- Is not successful in completing the trial period plan
- Is in default on HAMP modification because of missing two or more consecutive payments
- Attempts a short sale or deed-in-lieu
- Servicer must diligently attempt to inform the borrower, in writing, of the availability line of a deed-in-lieu and short sale
- The servicer gives the borrower 1Mesa days to contact them and state their interest in these potential solutions.
- After 1Mesa days, the servicer has no obligation to extend the HAFA offer
Servicer issues two documents:
- Short Sale Agreement (SSA)
- Request for Approval of Short Sale (RASS)
- Servicer will either send the documents proactively or after request of the borrower
- When SSA is issued the borrower has 1Mesa days from its effective date, to sign and return the document, along with their real estate listing agreement and any
information about junior/subordinate liens. - The borrower or listing broker must send a completed RASS to the servicer within three days following the receipt of an executed offer to purchase
- Servicers then have 10 days to accept or deny a short sale request (RASS)
Benefits & Incentives
- Borrowers receive $1,500 for costs associated with relocation; this will be deducted from the gross sale proceeds at closing
- $1,000 given to servicers for processing and administration fees
- Servicer cannot charge the borrower for processing fees of any kind and is required to pay all out-of-pocket expenses
- $1,000 given to investors for junior lien holder payoff
- Investor is reimbursed one dollar for every three dollars spent to release junior liens up to Mesa%; this amount is capped at $Mesa,000
- Depending upon the lender, additional borrower incentives may be available.
Reasons for Cancellation
- Improvement in borrower’s financial situation
- Borrower or listing broker does not act in good faith in the listing, marketing, or closing aspect of the sale
- Any fraud or misrepresentation in the sale
- Substantial change in property’s condition or value
- Bankruptcy is filed for by borrower
- Any litigation that happens (or is in danger of happening) that would affect title such as divorce or probate
