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HAFA is Officially Underway

The deadline for servicer implementation of the administration's Home Affordable Foreclosure Alternatives (HAFA) program has arrived.


HAFA, which is part of the Home Affordable Modification Program (HAMP), aims to help homeowners who are unable to qualify for a loan modification under HAMP by providing them with the option to pursue a short sale or deed-in-lieu. Under the program, financial incentives are provided to servicers and borrowers who utilize these foreclosure alternatives.

""As DSNews.com reported"":http://dsnews.comarticles/treasury-releases-guidance-for-making-home-affordable-short-sales-2009-12-01, the Treasury Department released ""HAFA guidelines"":https://www.hmpadmin.com/portal/docs/hafa/sd0909r.pdf on November 30, 2009, but participating servicers were not required to implement the program until April 5, 2010. That deadline is now here, but the ""National Association of Realtors"":http://www.realtor.org/ said its members are already hearing that the employees of many servicers have not yet heard about the program, making it clear that many servicers will not ""hit the ground running.""

However, many servicers are ready, and the program is expected to be a success.


According to the program guidelines, once a borrower is determined to be ineligible for a HAMP modification, the servicer must consider that borrower for HAFA within 30 days. Every potential eligible borrower must be considered for the program before the borrower's loan is referred to foreclosure or the servicer allows a pending foreclosure sale to be conducted.

If the servicer determines that the borrower is eligible, the short sale or deed-in-lieu process will begin. Qualified borrowers will be given pre-approved short sale terms before the property is listed, and once an offer is made, mortgage servicers will have 10 days to approve or reject the sale.

To encourage HAFA participation, the Treasury Department raised financial incentives under the program in late March. Borrowers are now eligible for $3,000 in relocation assistance, and servicers will receive $1,500 to cover administrative and processing costs for a short sale or deed-in-lieu completed under the program.

In addition, investors will be paid as much as $2,000 for allowing 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 basis, and to receive the incentive, subordinate lien holders must release their liens and waive all future claims against the borrower.

According to Treasury, the foreclosure alternative options offered under HAFA reduce the need for potentially lengthy and expensive foreclosure proceedings and also help preserve the condition and value of the property by minimizing the time a property is vacant and subject to vandalism and deterioration. In addition, Treasury said short sales and deeds-in-lieu generally provide a substantially better outcome that a foreclosure sale for borrowers, investors, and communities.

About Author: Brittany Dunn


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