Home Affordable Foreclosure Alternatives Program (HAFA)

The Home Affordable Foreclosure Alternatives Program (HAFA) was established to assist homeowners at risk of going into foreclosure. The program was implemented to extend additional assistance to homeowners who did not successfully complete a permanent loan modification under the Home Affordable Modification Program (HAMP) program. Any homeowner who is looking to short sale their home can also take part in the program, regardless of their participation in HAMP.

What HAFA Can Do For You

It is estimated that over a third of HAMP participants are no longer in the program. Those who have left the program will most likely go into foreclosure. In addition, 4 million borrowers delinquent on their mortgage are not even eligible for HAMP. The Obama Administration rolled out the HAFA program in an effort to address HAMP’s failures, and also to capture all the homeowners who were never eligible for the program. Alternatives to foreclosure included under the HAFA umbrella are streamlined short sale regulations and deed-in-lieu of foreclosure. Historically, lenders have frowned upon a borrower attempting a short sale, since they will not get the full amount owed on the mortgage. Lenders are hesitant to approve a short sale as the negotiation process can extend the sale of a property for months on end. HAFA has introduced incentives for a lender to move forward quickly if a homeowner should decide to attempt a short sell of their home. As with other government programs aimed at foreclosure prevention, a lender’s participation in HAFA is voluntary. HAFA regulations covers all mortgages, except those insured with Fannie Mae or Freddie Mac. These programs have their own short sale guidelines.

HAFA Eligibility

A borrower must submit a HAFA application to their loan servicer, to determine eligibility for the program. For owners who were previous HAMP participants, HAFA will obtain the borrower’s financial and hardship information already on file.  To participate in the HAFA program, an applicant must meet  the following requirements:

• The property submission must be for the homeowner’s principal residence.

• Only the first lien holder can accept the HAFA application and the loan must have been originated prior to January 1, 2009.

• The mortgage could either be seriously delinquent, or default is foreseeable in the near future. The owner does not have to be late on payments to meet eligibility requirements.

• The unpaid principal on the loan is can be no more than $729,750 for a single family residence.

• The monthly mortgage payment and associated fees must be more than 31 percent of a borrower's gross income. If there is more than one borrower on the loan, their payments must be 31 percent more than their combined income.

• The loan servicer has already considered the borrower for the HAMP program, however, one of the four following circumstances has occurred:
                o The borrower did not qualify for the HAMP program.
                o The borrower has not successfully completed the HAMP Program.
                o The borrower is 2 payments late on a loan that’s been modified through HAMP.
                o The borrower has requested a short sale or deed-in-lieu of foreclosure.

Once the lender approves the borrower’s application, they are agreeing to accept the proceeds from the sale of the home as payment in full and cannot pursue a judgment after the short sale has closed.

Short Sale Incentives

HAFA offers incentives to all the parties that choose to participate in the program, which includes:

  • A $1,000 bonus given to the servicing lender.
  • Up to $3,000 given to the 2nd lien holder with prior approval from the primary holder. 
  • Investors holding interest in the loan are given up to $1,000 to share proceeds with the 2nd lien holder.
  • Listing real estate agents are guaranteed a 6 percent commission.
  • Homeowners are given relocation assistance in the amount of $1500. 

Once the 2nd lien holder accepts this agreement, they are waiving their right to collect the balance due on their loan as well. Also, the primary lien holder will not be held responsible if the 2nd lien holder does not agree to waive their rights and continues to pursue the borrower for the balance of their loan.