RSS Feed for This PostCurrent Article

Home Affordable Foreclosure Alternative Program (HAFA) Changes Again


Home Affordable Foreclosure Alternative (HAFA)

New HAFA Changes

In March 2009, the U.S. Treasury issued guidance for loan modifications by participants in the Making Home Affordable Program.  The program was  updated and expanded in April of 2010 to include the Home Affordable Foreclosure Alternatives Program (HAFA).

HAFA  provided borrowers with an alternative to foreclosure through a short sale or deed-in-lieu (DIL) of foreclosure.
On August 9, 2011, the Treasury Department issued yet again another program update Supplemental Directive (11-08) (Click on link to download a copy) – however, for those homeowners that can benefit by and qualify for this program, these changes are not all that bad!

The new policy changes and clarifications of previous HAFA policies are as follows:
√    Borrowers are currently provided with a 14-day period to respond to a servicer’s invitation to participate in the HAFA program. The 14 calendar day period response time is only intended to give the borrower a guaranteed minimum time period to respond to the servicer. It is not meant to that if the borrower elects to participate in HAFA after the 14-day period that they are not eligible. Servicers may consider a borrower for HAFA whether or not they respond within the 14-day period.

√   Unless prohibited by investor rules, servicers should utilize the HAFA program rather than a lender’s or servicer’s proprietary short sale process in all cases where a short sale is approved by the servicer and the transaction meets the guidelines of the HAFA program.

√    It is clarified that the aggregate cap of $6,000 that is available to satisfy subordinate liens applies only to subordinate liens that are secured by a mortgage on the subject property. The $6,000 cap is not applicable to non-mortgaged subordinate liens such as mechanics’ liens or homeowner association liens. Servicers are allowed to authorize any additional portion of the gross proceeds to be used as payment to the subordinate non-mortgage lienholders in exchange for a lien release and release of borrower liability. This means that more than $6,000 can be paid to subordinate liens as long as no more than $6,000 is paid to the mortgage liens.

√   Before October 15, 2011, each servicer must develop and implement procedures that the servicer will follow to periodically to reevaluate property value and to reconcile discrepancies between the servicer’s market value estimate or BPO and the market value data provided by the borrower or the borrower’s real estate broker.

√   The term “Minimum Acceptable Net Proceeds” in a HAFA Short Sale Agreement does not really mean it is the minimum amount that must be netted from the short sale. The new supplemental directive clarifies that servicers are not prohibited from accepting a purchase offer that would result in net proceeds less than the previously stated minimum acceptable net proceeds if the servicer determines that the proposed sale is in the best interest of the investor.
√    Borrowers may use their $3,000 relocation incentive to pay for transaction costs that the borrower has instructed the closing agent in writing to pay, such as the cost of legal representation, overdue utility bills or minor repairs identified during the property inspection. However, borrowers may not use the relocation incentive to pay for the release of subordinate or non-mortgage liens recorded against the property and borrowers may not be required by the servicer, as a condition of the sale, to utilize the relocation incentive to pay any transaction expenses.

√    Servicers must, no later than October 15, 2011, complete and post on their websites a HAFA matrix explaining their HAFA program in a format that can be used to compare it with other servicers’ HAFA programs. The matrix is intended to assist the borrowers and their real estate agents in understanding any unique components of the particular servicer’s HAFA policy or any differences in the HAFA policy of a particular lender. The Treasury Department will post on the website information for the public about the web location of each servicer’s HAFA matrix. This is intended to make it easy for borrowers and their agents to identify in advance any different requirements between the various servicers’ HAFA policies.

In California, many short sale sellers are opting out of HAFA these days. This is due, in part, to the fact that California short sale sellers now have the anti-deficiency protection provided from all lien holders in Senate Bill 458.

In addition, the HAFA program can add considerable time to the short sale process putting significant pressure on sellers and buyers alike.

Nevertheless, there are some real benefits to HAFA for certain short sale sellers. If your clients are considering a short sale, you should definitely advise them to do the research and select the approach that best fits their needs.

Comments (0)

Trackback URL | Comments RSS Feed

There are no comments yet. Why not be the first to speak your mind.

Comments are closed.