The Home Affordable Foreclosure Alternatives (HAFA) Program

The HAFA program applies to loans not backed by Fannie Mae or Freddie Mac, which are expected to issue versions of their own shortly. The program is designed to streamline the use of the short sale process in a foreclosure. There are 43 pages of guidelines, but the National Association of Realtors (NAR) highlights these points of the program:

• The program complements the Home Affordable Modification Program (HAMP) by providing an alternative to borrowers (the current homeowners) who are eligible  HAMP eligible but are to keep their home. 
•  Uses borrower financial and hardship information that was collected when the homeowner was considering a loan modification.
•  Prevents the servicers from reducing real estate commission contracted in the listing agreement (up to 6 percent). Homeowners do not pay commissions in short sales.
• Provides for homeowners to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed). This is very important, since these are possible outcomes of a short sale.
• Standardizes processes, documents, and timeframes/deadlines.
• Gives financial incentives: $1,500 to assist the homeowner; the servicer is given $1,000 s to cover administrative costs; and up to $1,000 for investors; allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (second mortgage).
• Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

The program does not take effect until April 5, 2010, but may be implemented before that date if certain requirements are met. The program is in effect until December 31, 2012. Contact me for full details or get a copy of the Treasury Department's HAFA Short Sale Rules program.

No guilt or shame in a Short Sale

More often than not, when I meet with a financially distressed homeowner to review what options are available in order to correct their finances and avoid foreclosure, the homeowner is apologetic.

Throughout our lives we've been used to working, meeting our bills, and at some lucky times, saving or investing a little bit. Now, due to toxic loan products, the homeowner suddenly notices that they're falling behind, there's not as much money as there used to be. For a while there is borrowing, not acknowledging this as a temporary fix,.

Eventually there's the harsh reality that something has to give.

Could we manage our money better? I know that the answer for me is an absolute yes. Could better money management have avoided this situation. Probably not.

We were sold toxic loans. Financing is complicated. Often, when we're sitting across the desk from a lender we don't ask enough questions, we don't want to appear stupid. Unfortunately there is some extremely important information in that fine print. We remember that we were warned that we would probably need to refinance in a few years.

But in that time, the “collapse” had begun and property values were in decline and now homes weren't appraising for enough to provide enough equity for the refinance.

This video gives a good overview of how we got here:








The homeowners  didn't create the situation. Now they need to figure out what the best solution is for themselves. That's also why homeowners should not feel any guilt or shame because of this.