Minneapolis Short Sale and Foreclosure help - What is HAFA?
What is HAFA?
HAFA stands for Home Affordable Foreclosure Alternatives. It is a federal directive (Supplemental Directive 09-09) released on November 30, 2009 to help better facilitate the short sale process in an attempt to stem the tide of foreclosures. HAFA outlines standard guidelines, procedures, practices and finacial incentives for loan servicers (banks), investors (lenders), and home owners (borrowers). It officialy takes effect April 5th, 2010, however there is a process by which HAFA financial incentives can be claimed for short sales completed before the April 5th deadline.
Who can participate in HAFA?
To quote the directive:
"This Supplemental Directive provides guidance to servicers for adoption and implementation of HAFA for first lien mortgage loans that are not owned or guaranteed by Fannie Mae or Freddie Mac (Non-GSE Mortgages). In order for a servicer to participate in HAFA for Non-GSE Mortgages, the servicer must execute a servicer participation agreement and related documents (SPA) with Fannie Mae in its capacity as financial agent for the United States (as designated by Treasury) to participate in HAMP on or before December 31, 2009. In certain circumstances, Supplemental Directive 09-01 requires participating servicers to consider borrowers for other foreclosure prevention options, including short sale and deed-in-lieu programs. As a result, servicers already participating in HAMP must follow the guidance set forth in this Supplemental Directive, which provides servicers with the option to determine the extent to which short sales or deeds-in-lieu will be offered under this program."
So in a nut shell any homeowner with a bank that elects to sign up for the HAFA program, or any bank currently participating in the HAMP (Home Affordable Modification Program) can participate. Any potential participant must also be considered for a HAMP modification prior to any consideration being given to a HAFA option.
What does HAFA do to the short sale and foreclosure process?
- It simplifies and streamlines the short sale process by using standard processes, documents and time frames. Currently, short sale timelines vary widely depending on the transaction due to the variety of forms, practices and procedures used.
- It requires banks to consider HAMP eligible short sale requests within 30 calendar days of any of the following conditions: (i) Borrower does not qualify for a Trial Period Plan under HAMP; (ii) Borrower does not successfully complete a Trial Period Plan; (iii) Borrower is delinquent on a HAMP modification payment two consecutive times; (iv) Requests a short sale or DIL (deed in lieu)
- It requires banks to indicate approval or disapproval of an RASS (Request for Approval of Short Sale) within 10 business days.
- It prevents banks from foreclosing on homeowners currently in the HAFA program.
- It protects the homeowner from future liability for the debt. This is fantastic news for homeowners, as currently vindictive mortgage holders and services can seek deficiency judgments against homeowners unless the homeowner gets them to waive that right as part of the short sale negotiation. This applies even to homeowners in supposedly deficiency free states like Minnesota.
- It provides financial incentives for completing the short sale. Homeowners get up to $1500 to cover relocation costs, servicers get up to $1,000 for their effort, and the investor gets limited financial incentives for seeing that any junior lien holders get some compensation.
If you have any questions about HAFA, executing a short sale in the Minneapolis or Lake Minnetonka Minnesota area, or know someone facing a potential foreclosure we can help. Contact us anytime.
