The Home Affordable Foreclosure Alternatives (HAFA)
What is HAFA?
The Home Affordable Foreclosure Alternatives (HAFA) Program is a government-sponsored initiative overseen by the US Treasury Department and administered by Fannie Mae assisting all Home Affordable Modification Program (HAMP)-eligible homeowners in avoiding foreclosure, specifically through short sales or deeds-in-lieu of foreclosure.1 HAFA was announced on November 30, 2009 in a HAMP Update titled Introducing the Home Affordable Foreclosure Alternatives Program.2
HAFA directs lenders to assist eligible homeowners in quickly and effectively implementing short sales or deeds-in-lieu by providing financial incentives to lenders that carry out foreclosure alternatives through the program’s guidelines set forth in Supplemental Directive 09-09 Revised (revised March 26, 2010).3 The program was introduced in part with the intent to remove the stigma from short sales and help keep communities from being destroyed through massive foreclosures. HAFA in its current state is only applicable to conventional-type, non-Governmental Serviced Enterprises (non-GSE) mortgages and therefore does not apply to loans owned or guaranteed by Fannie Mae or Freddie Mac.4 These organizations may have plans to release their own versions of HAFA.
Details of HAFA
HAFA was introduced to simplify and streamline the short sale process. HAFA accomplishes this in the following ways:
* Compliments HAMP by providing viable alternatives for borrowers who are
HAMP-eligible
* Uses standard processes, documents and timeframes
* Provides financial incentives to borrowers, servicers and investors
* Requires that borrowers be fully released from future liability for the debt
* Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis
* Allows the borrower to receive pre-approved short sale terms prior to the property listing
* Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement1
HAFA provides financial incentives as follows:
* Homeowners qualify for $3,000 (updated March 26, 2010; was previously $1,500) in Borrower Relocation Assistance after a short sale or deed-in-lieu has been completed (may classify as taxable income in some cases2)
* Financial incentives for servicers participating in the program include up to $1,500 (updated March 26, 2010; was previously $1,000) servicing bonus upon completion of a short sale or deed-in-lieu
* Financial incentives for investors include up to $2,000 (updated March 26, 2010; was previously $1,000) for those who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders. This reimbursement will be earned on a one-for-three matching basis3
* Lenders pay all servicing fees – homeowners have no out-of-pocket expenses4
There are two additional documents which provide detailed technical information on data related to HAFA and the HAFA reporting procedures for servicers:
* HAFA Data Elements (Exhibit D) is a series of tables detailing specific reporting procedure data for servicers. It is available at the end of Supplemental Directive 09-09 Revised. This is a document for servicers
* The HAFA Data Dictionary is a spreadsheet in Excel format coordinating with HAFA Data Elements (Exhibit D) that catalogues all of the data elements and associated metadata for the program, including the names, definitions, allowable values, and data types. It also defines the functional areas where the data elements are being used.5 This is a document for servicers
Who is Eligible for HAFA?
Most homeowners facing financial hardship are eligible. As a rule, if a homeowner is eligible for HAMP but cannot pay the mortgage, then he or she is eligible for an assisted short sale through HAFA. However, loans owned or guaranteed by Fannie Mae or Freddie Mac do not qualify. Servicers must consider possible HAMP eligible borrowers for HAFA within 30 calendar days if the borrower has met one or more of the following criteria1:
* Does not qualify for a HAMP Trial Period Plan
* Does not successfully complete a HAMP Trial Period Plan
* Is delinquent on a HAMP modification by missing at least two consecutive payments
* Requests a short sale or deed-in-lieu2
For a loan to qualify, it must meet the following criteria:
* The property is the borrower’s principal residence
* The mortgage loan is a first lien mortgage originated on or before January 1, 2009
* The mortgage is delinquent or default is reasonably foreseeable
* The current unpaid principal balance is equal to or less than $729,750
* The borrower’s total monthly mortgage payment exceeds 31 percent of the borrower’s gross income (as defined in HAMP Supplemental Directive 09-013)
* The mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac4
The information provided in this article is based on government documents, which are subject to change. Therefore, Rudy Lira Kusuma, CDPE cannot be held responsible for the accuracy of the information provided here. The U.S. Treasury and The U.S. Department of Housing and Urban Development has set up a website for home owners to learn more about this Making Home Affordable program: www.makinghomeaffordable.gov (IM)
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