The HAFA Mortgage Program

HAFA – Home Affordable Foreclosure Alternative

In light of the rising number of property foreclosures in the United States, the government has expanded the Home Affordable Modification Program (HAMP) to include provisions and incentives for servicers to allow Short Sales as positive options for eligible homeowners in default who wish to avoid foreclosure.

The new program is called Home Affordable Foreclosure Alternative (HAFA).

Participation in HAFA cannot save the homeowner from losing his or her property, but it can eliminate the effects of a foreclosure on the homeowner’s credit. Financial incentives for participation in the program include a $1,000 servicing bonus for lenders and a $3,000 relocation bonus for displaced homeowners.

HAFA is designed for homeowners who have applied to HAMP for assistance but have had no success with their loan modification program. To participate in HAFA, homeowners must still meet HAMP’s eligibility criteria (principal residence, first-lien mortgage, serious delinquency, unpaid balance under $729,750, and a mortgage payment over 31 percent of gross income).

Homeowners must be considered for HAFA within 30 days if they cannot meet HAMP’s requirements or if they specifically request consideration for HAFA. However, the homeowner only has 14 days to respond to a written notice that HAFA may be available to them, giving the lender time to meet their 30-day deadline.

As with other short sales the lender or loan servicer of the primary mortgage must approve of the transaction and conduct their own independent appraisal. Under HAFA, however, they must also agree to accept the proceeds from the sale of the house as payment in full, waiving their right to collect the balance of the loan from the homeowner.