Yesterday, on April 5th, 2010 another piece of legislature has been put into effect, (although some mortgage servicers have already initiated it under certain conditions) to help those homeowners who are faced with foreclosure on their property. It is called Home Affordable Foreclosure Alternatives or HAFA.
HAFA is an extension to the previously enacted Home Affordable Modification Program (HAMP). It is geared towards homeowners who applied for HAMP but weren’t able to receive any modification to their current loan and are therefore in danger of foreclosure.
To be considered for HAFA assistance, the homeowners have to meet all the HAMP criteria. Once denied modification, they have to be considered for HAFA assistance within 30 days.
Don’t be fooled – HAFA can’t save a homeowner from losing their home, but it creates one more option as to how to possibly avoid it. It gives a homeowner a chance to sell their house as a short sale.
As with ordinary short sales, the mortgage company will conduct their own appraisal of the property being considered for HAFA assistance. However, under HAFA they have to agree to take whatever the property ends up selling for and waive their right to collect the rest of the amount from the homeowner.
Part of selling a home under HAFA is a Short Sale Agreement (SSA) – which states that the seller has to find a buyer and complete the transaction within 120 calendar days of receiving the SSA. This poses a challenge for a lot of today’s sellers. So, the lender has the option of extending this deadline by 245 days. In this case, a seller has a year to find a buyer and seal the deal. A year might seem like plenty of time to accomplish this, but in today’s market and with the current inefficiency in processing these applications, a year is barely enough. Also, the SSA requires that the buyer needs to remain in the residence for at least 90 days and if the transaction is indeed a short sale, the lender is required to pay all the administrative costs associated with the sale.
So… why would any lender go for participating in this program? HAFA offers financial incentives to both lenders and participating home owners. Some of the financial incentives include a $1000 servicing bonus to the lender and a $1500 relocation bonus for homeowners who are having to move as a result of selling/losing their primary residence.
It seems to me that there are a lot of programs such as HAFA to help struggling homeowners, but I don’t know if we have seen much improvement in the housing market. I am skeptical, but I am hoping that HAP (which includes HAMP, HARP, and now HAFA) is one of those initiatives whose results just take a while to really show and that we all will soon be able to see some substantial improvement in the foreclosure/short sale mess that we’re in right now.
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