Short Sale 101: HAFA

One option for sellers facing a short sale situation is the Home Affordable Foreclosure Alternatives (HAFA) program.

“What is HAFA?”

HAFA is a government sponsored program that sets certain standards for the short sale process and provides financial incentives to lenders that participate.

“What are the requirements for HAFA?”

According to MakingHomeAffordable.gov, you must meet the following in order to be eligible:

  1. You live in the home or have lived there in the last 12 months.
  2. You have a documented financial hardship.
  3. You have not purchased a new house within the last 12 months.
  4. Your first mortgage is less than $729,750.
  5. You obtained your mortgage on or before January 1, 2009.
  6. You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

In addition, California Real Estate magazine reports that to qualify for HAFA, you must also meet these conditions:

  1. The mortgage must be delinquent or near default
  2. The total monthly payment on the mortgage (including principal, interest, property taxes, hazard and flood insurance, condominium association fees, as applicable, and any escrow payment shortage amounts subject to a repayment plan) must be more than 31% of the gross income of all borrowers on that mortgage.
  3. The loan servicer must have already considered the borrower for a HAMP loan modification, and the borrower doesn’t qualify for a trial period plan, did not successfully complete a trial period plan, is delinquent on a HAMP modification by missing at least 2 consecutive payments, or has requested a short sale or a deed-in-lieu.

Unfortunately, there is a long list of eligibility requirements for HAFA .   It’s important to keep in mind also that loan servicers will also have their own written guidelines which will allow them to accept or deny HAFA applications based on such factors as severity of loss involved, local market conditions, the timing of pending foreclosure actions, and borrower’ motivation and cooperation.

For more information about HAFA, as well as other programs, please visit www.makinghomeaffordable.gov/programs/exit-gracefully/Pages/hafa.aspx.

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