The Home Affordable Foreclosure Alternatives Program, referred to as HAFA or a HAFA short sale, offers homeowners an easier path and various incentives for completing a short sale rather than letting the bank foreclose on their home. It is hoped that HAFA can help to standardize a process that until now has been difficult and unpredictable in many instances. Homeowners who opt for a HAFA resolution typically do not qualify for a trial modification under HAMP, have not successfully completed their trial period, or simply want to sell as an alternative to foreclosure.
The HAFA program took effect on April 5, 2010 and sunsets on December 31, 2012. Here's some tips for sellers. Implementation of the HAFA program may differ from lender to lender. Sellers should consult their CPA or attorney as to their individual circumstances.
Three HAFA Program Benefits for Sellers
HAFA Program Eligibility - Sellers must meet all 5 Criteria
The HAFA program took effect on April 5, 2010 and sunsets on December 31, 2012. Here's some tips for sellers. Implementation of the HAFA program may differ from lender to lender. Sellers should consult their CPA or attorney as to their individual circumstances.
Three HAFA Program Benefits for Sellers
- $3,000 relocation assistance (upon completion of approved HAFA short sale).
- Full release from any future liability for first mortgage debt. No cash contribution, promissory note, or deficiency judgment is allowed.
- Pre-approved short sales terms before listing the property including the minimum acceptable net proceeds.
HAFA Program Eligibility - Sellers must meet all 5 Criteria
- Living in the home as a primary residence.
- Amount owed on the first mortgage is no more than $729,750 for one unit.
- Current Mortgage was taken out on or before January 1, 2009.
- Payment on the first mortgage (including principal, interest, taxes, floor and hazard insurance, and homeowners association dues, if applicable) is more than 31% of current gross income before taxes and deductions.
- The homeowner is experiencing a hardship (such as a job loss, divorce or medical emergency) and is unable to afford the current home loan.
HAFA Processing Timelines - here's what to expect in if you are dealing with BofA.
1) Initial call and evaluation of HAFA eligibility. The seller will be required to submit a complete financial package if they haven't already done so as part of a loan mod or HAMP. BofA will probably require that the seller's information be uploaded to their Equator system. The seller's real estate agent or the negotiator working with the agent should be able to do this.
2) Within 60 days (BofA advertises 30 but don't count on it) the seller will receive a Short Sale Agreement and an acceptable sale price if accepted for HAFA. A major difference between HAFA and the standard short sale process is that the seller is given approval up front as to hardship and price. In a standard short sale, the package submitted to the bank is both the price you hope will get approved as well as your hardship package. You have no guarantee either will be approved.
3) The seller has 120 days to list the home and find a buyer at the approved price. The home can be listed prior to receiving BofA approval. BofA requires the services of a licensed real estate agent.
4) After the seller receives an offer, within 3 calendar days a Request for Approval of a Short Sale document as well as the offer letter must be submitted. BofA states they will get back to you with a decision on the offer within 10 business days.
5) If BofA accepts the offer, the house is sold and the mortgage and any other loans against the home are settled from the proceeds of the sale.
Tips for Sellers considering a HAFA Short Sale as an alternative to Foreclosure.
- Engage a real estate agent as early in the process as possible. You will not be able to do a FSBO HAFA short sale.
- Contact your lender to confirm their participation in HAFA, get their forms and understand their process.
- Confirm your HAFA eligibility. If any of the five criteria described above are not met, you may not qualify for a HAFA short sale.
- Set your expectations reasonably. See the example timelines above.
- If you have a second mortgage or HELOC, depending on your servicer's program, you may have to obtain the short sale release for the second on your own. If your first and second are with the same servicer (investor may be different) it is likely (at least with BofA) that the lender will handle both for you.
- You do NOT have to wait until you receive HAFA approval to list your home for sale. Even if you are turned down for HAFA, you can still proceed with a standard short sale.
- Return the calls from your lender. Let the person calling who, who is probably in collections know that you have applied for HAFA short sale approval.
- Be committed to participating in the process. Provide ALL the financial information asked for in a timely and prompt manner.
If you need to list and sell your home as a short sale in Los Angeles or Orange County.....
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