Does HAFA really work??
Post date: May 27, 2011 6:36:32 AM
You may have received a letter from your lender notifying you of a new government programs for homeowner mortgage assistance called “Home Affordable Foreclosure Alternatives (HAFA)." This program appears to hold some promise for streamlining the lengthy short sale process and also offers incentives for homeowners and lenders to participate. Here's some of the basics for those currently upside down on their home:
What is a Short Sale?
A homeowner works with a local realtor to sell their property for a current market rate and the mortgage lender agrees to accept the net proceeds of the sale even if the proceeds are less than the total amount due on the mortgage.
First, the program promises a speedier, smoother process for processing a short sale. Through pre-approving HAFA participants, pre-determining listing prices with agents and setting a timeline for the active marketing of homes the program attempt to streamline some of the delays and frustrations for buyers and sellers.
Second, HAFA provides incentives for borrowers and banks to proceed with a short sale. Borrowers who participate will receive $3000 in relocation expenses at the close of escrow and assurance that they are not responsible for any remaining debt or obligations on their first mortgage. Lenders such as Freddie Mac also states that your home cannot be foreclosed upon if you are actively complying with the HAFA short sale program.
If the short sale does not succeed (no offers submitted for an acceptable amount with 120 days) then the homeowner can obtain a Deed-in-Lieu instead of foreclosure proceedings. A Deed-in-Lieu is where a homeowner voluntarily transfers ownership of the property to the lender instead of the lender legally seizing the property through foreclosure.
Is My Lender a Participant in HAFA?
View comprehensive list at: http://makinghomeaffordable.gov/contact_servicer.html
What about Freddie Mac and Fannie Mae Loans?
Yes, as of August 5, 2010, Freddie Mac and Fannie Mae federally backed mortgages. If you're not sure if you have a Freddie Mac or Fannie Mae loan, you can check at the links below. Either way, you would call the number on your loan statement to start the prequalification process:
Do you have a Freddie Mac Loan? - http://www.freddiemac.com/mymortgage/
Do you have a Fannie Mae Loan? - http://www.fanniemae.com/loanlookup/
Do I Qualify for HAFA?
The first step for qualifying is to first request a “loan modification” to determine if it is possible to adjust your current loan to make it more affordable. This program allows homeowners to continue to own their home at lower monthly payments. You would call your lender and ask if you qualify for the “Home Affordable Modification Program” (HAMP).
If you find that you do not qualify for HAMP, here are the HAFA requirements:
Be the owner-occupant of a one- to four-unit home. Exception - If the homeowner relocated more than 100 miles from the property AND has not purchased a one- to four-unit property within 90 days prior to the date of a HAFA Agreement.
Have an unpaid principal balance that is equal to or less than:
o 1 Unit: $729,750
o 2 Units: $934,200
o 3 Units: $1,129,250
o 4 Units: $1,403,400
Have a first lien mortgage that was originated on or before January 1, 2009.
Have a monthly mortgage payment (including taxes, insurance, and home owners association dues) greater than 31% of your monthly gross (pre-tax) income.
Have a mortgage payment that is not affordable due to a financial hardship that can be documented.
If you answered “Yes” to these questions then you passed the basic requirements and you should contact your lender to dive into more of the details on your loan.
If I Don’t Qualify for HAFA does that mean a short sale is not an option?
A short sale is still an option for anyone that owes more on their home than it is currently worth. Not qualifying for HAFA simply means the additional government incentives such as the relocation reimbursement are not available.
Does HAFA work?
Now, that's the big question. There is certainly a need to streamline the short sale process. As of today (August 13, 2010) in the Fresno County local market, there are 1,354 active short sale properties for sale. Those homes have lingered on the market for an average of 137 days. This past month, a whopping 42% of all sold short sales sold in July (121 properties) had been on the market longer than 120 days before selling.
I’ve listed and closed nearly 50 short sales in the past two years and the review process by lenders, investors and mortgage insurance providers has stretched from 30 days to over a year. So, consequently I’m skeptical of improvement until I see this program in action.
So far, I have two HAFA qualified short sales actively on the market with Bank of America and Wells Fargo. Wells Fargo’s HAFA program currently appears much more automated. We were able to obtain HAFA pre-qualification for our client by emailing documents on their behalf. Bank of America, on the other hand, required communication directly with our client through a separate HAFA phone number and could only send documents through US Mail. In that specific case, the documents never arrived and our client had difficulty understanding the requirement complexities by phone. So, the frustration of not being able to communicate directly with Bank of America on our client’s behalf is complicating any pre-qualification. In the midst of those delays, the buyer found another home and we are back to the starting point.
So, no successful HAFA short sales to date, but the program is new. I would still encourage anyone who believes they qualify to consult their lender and start the process.