Home Affordability Foreclosure Alternatives (HAFA) Short Sale Rules
Help has supposedly arrived to help sellers (and Realtors®) doing short sales. The federal
government’s Home Affordable Foreclosure Alternatives (HAFA) program has established short sale rules that
are supposed to be streamlined and created incentives for borrowers and lenders to work together to avoid
foreclosure. The rules are intended to are intended to speed up the short sale process – which we all know is
desperately needed! The idea is that under HAFA, sellers will receive preapproved short sale terms from the
lender prior to putting their home on the market. This should greatly reduce the time involved as well as the
possibility of losing your buyer in the middle of the process.
There are requirements that a seller-borrower must meet in order to qualify for the HAFA program. First, in
order to be eligible, the seller must apply for a loan modification through the federal government’s Home
Affordable Modification Program (HAMP). Sellers who do not qualify for a loan modification or miss payments
during the initial loan modification period qualify for HAFA. Note that if a seller-borrower qualifies for a loan
modification and keep payments current during the initial loan modification will not qualify for the HAFA
program.
Once a seller-borrower is determined “eligible”, then the property and mortgage must meet certain
requirements:
- The property has to be the borrower’s principal residence.
- The borrower’s mortgage has to have originated before Jan. 1, 2009.
- The mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac.
- The borrower has to be delinquent or default is foreseeable.
- The homeowner has to demonstrate hardship.
- The borrower’s total monthly housing payment must exceed 31 percent of the borrower’s monthly gross income.
- The borrower’s unpaid principal on the mortgage cannot exceed $729,750.
- If the seller-borrower meets is eligible and meets the above requirements, the HAFA program should be
available to the seller to hasten the short sale process.
What is the new process under HAFA?
1. Lenders must offer a short sale in writing to the borrower within 30 days if the borrower does not
qualify for or complete a loan modification.
2. Borrowers then must respond within 14 days to the lender’s short sale agreement.
3. When a purchase offer is made on the property, the seller-borrower must submit the purchase contract
to the lender within 3 days, along with the buyers’ mortgage preapproval and the status of negotiations
with other lien holders on the property.
4. Lenders must approve or deny the purchase contract within 10 days of submission.
All of this should take no more than 57 days!
HAFA rules also state that lenders must release borrowers from the obligation to repay the difference between
the sales price and the loan amount. No deficiency judgments are allowed for a first or second loan. This
is a significant change from current law and will relieve much stress from current homeowners who are afraid to
get out from under their current debt load even though it is too much for them but they are worried about a
promissory note from the second lienholder if they walk away.
NOTE: The HAFA program will only be in place between April 5, 2010, and Dec. 31, 2012.
The information in this article is believed accurate as of the date of publishing. This information is not intended to be legal advice for a
specific situation but rather to provide answers to general questions. Advice in specific situations may differ depending upon a wide variety of
factors; therefore, individuals with specific issues should seek the advice of an attorney, financial advisor or other professional.
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