HAFA stands for a federal government program named "the Home Affordable Foreclosure Alternatives Program" which was created to compliment another government program, the "Making Home Affordable Program." Both are under the supervision of the U.S. Treasury Department as part of the TARP (Troubled Asset Relief Program).
After discovering that the Making Home Affordable Program was not helping as originally anticipated, the feds introducted HAFA. Seems that the Making Home Affordable Program found some lenders not approving these loan modifications. In other instances, the homeowner/borrower did not approve of them (the terms were not acceptable), and sometimes those who did agree to them later found that they were unable to stay the new course, which left them with a looming foreclosure.
With HAFA, the federal government is giving borrowers a way to circumvent that inevitable foreclosure after the modification idea has not worked for them. How? HAFA gives those borrowers a viable alternative to foreclosure. Here, the issue of being able to keep the home is not viable, and HAFA steps in to help the homeowner avoid a foreclosure on their record through either (1) a short sale or (2) a deed in lieu of foreclosure.
As defined by HAFA, a short sale is where "….the servicer allows the homeowner to list and sell the mortgaged property with the understanding that the net proceeds from the sale may be less than the total amount due on the first mortgage." Here, the homeowner finds someone to buy the home with the lender's approval, thereby avoiding foreclosure.
HAFA defines a deed in lieu of foreclosure as the voluntary transfer by the borrower of "… ownership of the property to the servicer— provided the title is free and clear of mortgages, liens, and encumbrances." Here, the homeowner signs his or her interest in the property over to the lender – transfering legal title to the bank just as a foreclosure would do, but without the negative ramifications of a foreclosure process.
What about deficiencies? HAFA gives the borrower a clean slate.
In the case of either a short sale or a deed-in-lieu, the lender (servicer) may have a remaining balance on the books, once the remaining amount due on the home loan is compared to the property value of the home itself. The negative number, "the deficiency," can be the subject of a collection lawsuit by the lender in most states. However, HAFA provides further assistance to the borrower/homeowner by removing this vulnerability as the lender must agree to write off that loan balance, as well as all other obligations tied to the first lien mortgage. Under HAFA, once the lender accepts the short sale or the deed in lieu of foreclosure, the loan balance is considered cleared.
Once HAFA's plan to salvage the failed modification situation through a short sale or deed-in-lieu, the final step remains of getting the homeowner/borrower into a new home – now that their home has been transferred to a buyer or to the bank. To that end, HAFA will pay up to $3000 per homeowner in relocation costs.
Can HAFA help you? It depends.
On 12/31/2010, there were 521,630 active permanent modifications and 152,289 active trial modifications, while 1,025,907 homeowners were rejected for HAMP modifications by the eight largest banks/servicers, and another 572,655 trial modifications failed.
Accordingly, the Treasury Department responded with changes that became effective February 1, 2011 to make these programs more helpful to American homeowners, found in its December 2010 version 3.0 of the Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages. Now, for example, banks/servicers do not have to verify a borrower's financial information or to determine if the borrower's total monthly mortgage payment exceeds 31 percent of the borrower's monthly gross income before considering them for HAFA.
Lenders/Investors are not complying or helping clients. There must be a complaint's department who can effectively hear the client's complaints and step it expediteously.
Please send us the doc or links for the paperwork to get us enrolled in the hafa program.
Just a quick note to say that I am one of those hard working middle American's with a good job who had difficulty keeping up with my mortgage after divorce and the Wachovia Pick a Pay Loan that was recently settled in a law suit. After three years of frustration, trying to modify, I was approved for HAMP in 2011. Guess what, the payment was exactly the same as my existing mortgage… Did not know whether to laugh or cry. Anyway, here in lies one big gap with all of this "help". I could actually afford to stay in my home if the bank really wanted to help. Three things. Lower my interest rate, increase the months owed on my loan and reassess my home to its true value! Sounds simple but instead my three kids and I are being forced to leave the home they grew up in. The Government bases everything on 31% of GROSS income. Maybe one day they will base it on what we actually bring home to live on………..Do you think I would get more help if I quit my professional job and went on welfare………… Probably.
If you are qualified for the HAFA program and for example your bank of which is foreclosing on your house sells your proeprty for $70,000 do you(homeowner) have to pay taxes on the $70,000 or does the Bank if in the Hafa program.
What if the bank approves an investor under the HAFA program and issues a HAFA short sale approval letter. In that case, the deficiency is still forgiven, right?