Using The HAFA Program To Develop Home Foreclosure Alternatives

On April 5, 2010, the Homeowners Affordable Foreclosure Alternatives Program (“HAFA”) went into effect after being introduced the previous year by the US Government. The HAFA program provides additional options to homeowners facing foreclosure, and offers incentives to lenders and borrowers who utilize a short sale or deed-in-lieu to avoid foreclosure. HAFA is designed for homeowners who have applied for assistance under the Home Affordable Modification Program, but have been unsuccessful in obtaining a loan modification. Participation in the Program cannot save the homeowner from losing his home, but can eliminate the effects of a foreclosure on the homeowner’s credit. In some instances, the homeowner may be eligible for relocation dollars to assist with a move to another home.

Am I Eligible For HAFA?

To be eligible for the HAFA Program, the borrower must meet the following criteria:
•    The property must be your primary residence;
•    The loan must have been originated before January 1, 2009;
•    The mortgage must be delinquent or default must be reasonably foreseeable;
•    The current unpaid principal balance may not be more than $729,750; and
•    Your total monthly payment must exceed 31% of your gross income.

If selected for the Program, the homeowner may pursue a short sale or deed-in-lieu of foreclosure (“DIL”). Under a short sale, the lender allows the homeowner to list and sell the mortgaged property with the understanding that the sale proceeds may be less than the total amount owed on the first loan. The benefit of a short sale under the HAFA Program is significant. Lenders are prohibited from requiring a cash contribution or promissory note on the remaining loan balance, and forfeit the ability to pursue a deficiency judgment against the homeowner. 

If the homeowner makes a good faith effort to sell the property but is unsuccessful, the lender may consider a DIL. With a DIL, the homeowner voluntarily transfers ownership of the property back to the lender – provided title is free and clear of mortgages, liens and encumbrances.  As with the short sale, participating lenders under the Program may not seek a cash contribution or promissory note from the borrower.

Benefits of the HAFA Program include a streamlined short sale and DIL process, which make it easier to work with the lender. In addition, homeowners who enter into a short sale or DIL are eligible for $3,000 relocation bonus to help cover their moving costs.

Contact our office to learn more about the HAFA Program and whether you are eligible. 

Eric L. Nesbitt, Esq.
Law Offices of Eric L. Nesbitt, PC
Phone 303-741-2354
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