HAFA Loan Modification -A viable alternative to the menace of reality foreclosures
A new program was launched on April 5 2010 by the US treasury department under the Obama’s Home Affordable Modification Program. It is called HAFA or Home Affordable Foreclosure Alternatives. It is part of a continuing effort on part of the US government to help the debt ridden home owners of the country. The following article explains the key points regarding this new program.
Need for HAFA:
Home Affordable Modification Program (HAMP) or better known as Obama’s Loan Modification Program was launched to help nationwide home owners who were struggling to repay their mortgages with the threat of foreclosure looming large on them. It was suppose to help the real estate industry too as foreclosures meant the real estate value of the neighborhoods tumbling down.
However a significant section of the home owners who were eligible for Home Loan Modification under HAMP were still not able to save their homes. And the foreclosure rate remained high. Hence HAFA was launched as an alternative to the costly foreclosures. Under this, those families who are not able to afford even the loan modification program may be able to avoid foreclosure by doing a short sale or DIL (Deed in lieu).
Which service providers will be participating under HAFA?
All service providers that provide the service for HAMP will also be eligible to participate in HAFA program. However, Freddie Mac and Fannie Mae will have their own guidelines for their short sale policies. Also, FHA and VA are not taking part in HAFA as they already have short sale programs of their own.
What is the eligibility for the borrowers under HAFA?
First and foremost the borrowers should meet basic eligibility criteria of HAMP. They include:
- The real estate property in question must be their principal residence.
- The date of origination of the First lien or mortgage should be before 2009.
- It can be reasonably foreseeable that borrower is going to default or the possibility of delinquency of the mortgage.
- Balance principal cannot be more than $729,750.
- The monthly installments should be more than the 31% of the gross income.
Are there any incentives for the players/borrowers involved in HAFA program?
The treasury department has incentivized all players involved with HAFA program including the investors who will release a part of the sale proceed to the subordinate lien (this is to encourage subordinate lien holders not come in the way of DIL or pursue against deficiency judgments).
The incentives are as of below:
- Up to $3000 towards borrowers, as a cost of relocation to a more affordable residence.
- $1500 to the servicers towards administrative and processing cost incurred by them while executing the short sale.
- Up to $2000 for investors allowing part of short sale proceed going to the subordinate liens (as mentioned above).
There are a number of mortgage attorneys and mortgage service providers that will guide you through the entire process who specialize in HAFA and HAMP and deal with the banks and lenders on your behalf for a nominal fee.
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