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HAFA? What The Heck Is THAT and Why Should You CARE!??

Well…let’s start by defining what HAFA means. It stands for Home Affordable Foreclosure Alternative Programs. It is basically divided into four separate programs.

1. Home Affordable Refinancing Option (I am not addressing this option in this post as most folks in our market exceed this requirement… “The amount you owe on your first lien mortgage does not exceed 125% of the current market value of your property”).

2. Home Affordable Modification Program

3. Second Lien Modification Program

4. Home Affordable Foreclosure Alternative Program

Not all loans will qualify. All servicers for loans owned or guaranteed by Fannie Mae and Freddie Mac are required to participate. Additional servicers are strongly encouraged to participate. The list of servicer participants will be updated at www.MakingHomeAffordable.com/contact_servicer.html.

Since there was A LOT of material to digest in the class I attended on this…I will just be addressing items 2 and 4 for now.

If you are a homeowner looking for options…start here…at the Making Home Affordable web site. At first it may seem a bit confusing…but might well be worth it in the long run!

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The first thing they are going to want you to do is determine if you are eligible for the “Home Affordable Modification Program”. The borrower MUST be the one to initiate the process…not the Realtor or another 3rd party.

To apply for a modification under HAMP, you must:

  • Be the owner-occupant of a one- to four-unit home.
  • Have an unpaid principal balance that is equal to or less than:
    • 1 Unit: $729,750
    • 2 Units: $934,200
    • 3 Units: $1,129,250
    • 4 Units: $1,403,400
  • Have a first lien mortgage that was originated on or before January 1, 2009.
  • Have a monthly mortgage payment (including taxes, insurance, and home owners association dues) greater than 31% of your monthly gross (pre-tax) income.
  • Have a mortgage payment that is not affordable due to a financial hardship that can be documented.

If you answered YES to all of these questions, you may be eligible for a modification under HAMP. Only your servicer will be able to tell you if you qualify.

What if you are facing foreclosure?
Participating servicers may not refer a loan for foreclosure sale or proceed with a foreclosure sale on an eligible loan until the homeowner has been evaluated for HAMP and, if eligible, a trial modification offer has been made. Participating servicers must use reasonable efforts to contact homeowners facing foreclosure to determine their eligibility, including in-person contacts at the servicer’s discretion. Foreclosure sales may not be conducted while the loan is being considered for a modification or during the trial period. Additionally, once a homeowner has entered into a trial period plan by submitting the first trial period payment, the servicer may not take the first legal action to initiate a new foreclosure.

You owe more than your house is worth. Will a modification under HAMP reduce what is owed?
The primary objective of the HAMP is to help homeowners avoid foreclosure by modifying troubled loans to achieve a payment the homeowner can afford. Servicers may, but are not required to, offer principal reductions. It is more likely that your servicer will use interest rate reductions and term extensions in order to make your payment more affordable.

What if you are not eligible for HAMP?
If you are determined to be ineligible for HAMP, the servicer will consider you for other home retention options. If homeownership is no longer an affordable or desirable option, the servicer will consider you for additional foreclosure avoidance programs, including Home Affordable Foreclosure Alternatives Program (HAFA).

The point of this to take note of is that you may be FORCED to jump through the hoops of HAMP…to get to the starting point of applying for the HAFA short sale option.

Homeowners must be evaluated for HAFA within 30 calendar days of the following:

  • The borrower does not qualify for HAMP.
  • The borrower does not successfully complete a HAMP Trial Period.
  • The borrower is delinquent on a HAMP modification.
  • The borrower requests a short sale or Deed-in-Lieu of Foreclosure.

Before evaluating a homeowner for HAFA, a participating servicer must first consider that
homeowner for other loan modification or retention programs that they offer. In addition, pursuant to
the servicer’s policies, every eligible homeowner must be considered for HAFA by a participating
servicer before the homeowner’s loan is referred to foreclosure and before the servicer may allow a
pending foreclosure sale to continue.

Why consider a HAFA short sale? Well…I can give you a few reasons!

  • Borrowers will get $3,000 as relocation expense at close of escrow
  • The servicer will approve the list price even before listing the house if you are qualified for HAMP but cannot afford it (this means most agents will more willingly SHOW short sale listings!)
  • Servicer must forfeit the ability to pursue a deficiency judgment against the borrower.  This is one is a biggie! Homeowners who are doing short sale under this program they don’t have to worry about any deficiency judgment after selling the house after the sale
  • The servicer may pay the subordinate liens not more than 6% of the unpaid principle balance of their loan to release the lien and full release of borrower liability (No more fear of deficiency judgment from the second lien holder either!)
  • The servicer will pay the allowable closing costs for the seller to close the transaction
  • The servicer may not require a cash contribution or promissory note from the borrower
  • The servicer will pay the realtor’s commission, so no out of pocket expenses from the seller

    So…if you are someone who is losing sleep in fear of having to get rid of your home…call me and let’s talk about this very viable option.

    Or…if you are looking to buy a home in the Metro Phoenix Area…I would love to help you. Call me at 602-504-3898…or go to my web site at www.AdeleCoffman.com and SEARCH FOR HOMES JUST LIKE AGENTS DO!

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