As April 5th approaches, everyone is excited about the official start of the Home Affordable Foreclosure Alternatives (HAFA) program. HAFA is a major development to curb the number of foreclosures by allowing home owners the opportunity to sell their home through the short sale process. Many incorrectly misunderstand the program to approve all short sales; however, it is a measure to facilitate lenders’ loss mitigation processes (the process that lenders use to determine the manner in which to dispose of property and lose the least amount of money) that includes short sales, deed-in-lieu (of foreclosure), and foreclosure.
To provide assistance to financially challenged home owners, the Making Home Affordable program (MHA) was announced February 2009. The program was devised to assist eligible home owners retain their homes by either mortgage modification or refinance. HAFA was introduced in May of 2009 to provide structure to the seemingly convoluted loss mitigation process (www.treas.gov).
You probably already know that a short sale occurs when a home owner sells their home for less than what they owe their lender. In a short sale, the lender is asked to give their blessing and to “forgive” the difference between the sale price and what is owed. Home buyers often seek out short sales as a means of purchasing a “bargain” priced home. Unfortunately, the traditional short sale is typically a lengthy process that is full of pitfalls; but for patient home buyers the short sale is worth the wait.
On average, it is not unusual to wait 2 to 4 months to receive third party approval for a short sale; some short sale approvals can take much longer. Reasons for lengthy waits for short sale approvals are complex and varied, but may be due to (and not limited to) consultations with bond holders (of mortgage backed security within which the loan was pooled), a vast backlog of files, and the loss mitigation process itself.
The HAFA program is intended to reduce the cost and impact of foreclosure to lenders as well as neighborhoods. The program allows the home owner 90 days (or more depending on the market) to procure a buyer for their home at a sale price that is set by their lender; this allows a home buyer to purchase the short sale without waiting months for a short sale approval. If the short sale period ends unsuccessfully, the home owner must give the home back to the lender via a deed-in-lieu.
Foreclosure proceedings are allowed to coincide with the short sale, however the foreclosure sale is deferred until the short sale process is concluded. Monetary incentives are given to participating lenders as well as to home owners who adhere to the program until its fruition. Eligible home owners will be accepted into the HAFA program until December 31, 2012.
Since HAFA will officially begin in a few weeks, information is being provided through many outlets. It is understandable that some of the information provided is incorrect and/or sensationalized. To qualify for HAFA, the home owner must be eligible for MHA (mostly, loans that have been bought by Fannie Mae or Freddie Mac) but either did not qualify for a modification or was unable to complete the process. If you are unsure of your eligibility, program guidelines, and additional information, check with your lender and/or the Making Home Affordable website (www.makinghomeaffordable.gov).
This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.
by Dan Krell © 2010