Benefits and Requirements of the HAFA Program–Updated March 2012:
• $3,000.00 in relocation assistance to the borrower at closing
• Full debt forgiveness on all mortgages (both 1st and 2nd)
• No promissory notes
• No cash contributions
• 2nd liens can now get up to $8,500. (It was $6,000).This provides consistency for all parties involved
• Submittal of a short sale package and HAFA application prior to having an offer to get the process started (this provides a head start)
• Foreclosure will be delayed for at least the duration of the approved HAFA period which is no less than 120 days
• The deadline for HAFA has been extended. A borrower now has until December 31, 2013 to submit a Short Sale Agreement or a written request for a consideration for a Short Sale Agreement to be eligible for HAFA.
• There are no longer any occupancy requirements for HAFA eligibility. (Before the update the property had to be occupied as the borrower’s primary residence at some point within the prior 12 months).
• Servicers can now accept a full payment if the borrower requests to make a full contractual payment in order to stay current on the loan.
When the program came out in April 2010 it was for the most part very unsuccessful. Not only did it have strict requirements such as the mortgage having to amount to more than 31% of the borrower’s income, and the borrower having to be currently living in the home, but all the servicers were lost on how to get them done.
In January 2011, the Treasury came out with Update 10-18, which included a change where servicers were no longer required to verify a borrower’s financial information or to determine if the borrower’s total monthly mortgage payment exceeded 31 percent of the borrower’s monthly gross income.
This update was very effective and dramatically increased the amount of HAFA short sales being approved. In addition, the lenders also improved their processes to approve these HAFA short sales.
Another change was introduced in August 2011 called Update 11-08, which had even more advantages to the borrower:
- Servicers may still consider a borrower for HAFA whether or not the borrower responds to the HAFA solicitation letter within the 14 day response period
- Clarifies that the $3,000 in relocation money can be used by the borrower to pay certain bills at the closing that the borrower chooses such as municipal utility bills or any other transition costs
- Highlights that servicers are allowed to accept a purchase offer that results in a lower net proceed than the minimum acceptable when the servicer determines it is in the best interest of the investor just like any other short sale
- Servicers must periodically re-evaluate property values and market data provided by the borrower or borrower’s real estate broker
Fannie Mae and Freddie Mac still have not publicly adopted these updates, which is unfortunate, but it does seem as if they have loosened their own internal rules with respect to HAFA as we are getting more and more of them approved.
In 2011 we got over 50 HAFA short sales approved and closed. Currently, we are working on well over 100 HAFA short sales and expect this to continue to increase as this program becomes more and more popular. We have also conducted HAFA short sales with every major servicer such as Bank of America, Citi, Chase, GMAC, Wells Fargo, Ocwen, and with multiple smaller servicers such as American Home Mortgage, Litton, Mass Housing, Wachovia, and Bank United.
It is clear that the Treasury has worked very hard to make HAFA a successful program and they have accomplished just that. This is a great program that more distressed homeowners should be taking advantage of.
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View our video below for information on how the 2007 Mortgage Debt Relief Act Affects Short Sales
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