Q AND A ON HAFA GOVERNMENT RESCUE PROGRAM FOR HOMEOWNERS

May 12, 2010 at 2:45 pm Leave a comment

Today, May 11, 2010 I attended one of the first Realtor classes on the Home Affordable Foreclosure Alternative (HAFA). This government initiated program is aimed at expediting and simplifying the short sale process. HAFA took effect on April 5, 2010. Since it is so new, many lenders, Realtors and other professionals in the real estate industry as well as the public have little knowledge about it. This is the third program that the government has created to help homeowners and improve the housing market.
HARP
First there was the Home Affordable Refinancing Program or HARP. This program did almost nothing to help homeowners in Arizona. Since only loans that are 25% or less upside down are qualified to refinance and most loans in Arizona are underwater by more than 25%.
HAMP
Next there is the Home Affordable Modification Program or HAMP. People were excited to hear about this rescue program only to find out that their lenders did not participate in the program. Very few people were helped. Based on the US Treasury report through February 10, 2010, the program resulted to 40,000 active trials and only 9,763 or just over 20% became permanent modifications. The rest of the homeowners went back in default. To find out about Home Affordable programs by the government, go to Hmpadmin.com.
HAFA
The latest creation of the government is the HAFA program designed to speed up the short sale process nationwide by setting a pre-approved short sale price and providing incentives to the servicers, subordinate lienholders and homeowners.
What are the eligibility requirement of HAFA?
· Owner Occupied 1-4 family residence
· $729,750 maximum loan balance
· Applies only to 1st position loans
· Loan was originated prior to Jan. 1, 2009
· Monthly payment exceeds 31% of gross income
· Hardship exist
· Loan is in default or at risk of default
What are the features of HAFA?
· Pre-approved short sale
· Short contract approval or denial
· No “commisionectomy”
· Full release of liability on 1st and subordinate liens
· Foreclosure suspension
· Payment forbearance or reduction
· $3,000 to seller for moving expenses
· Servicer incentives of $1,500
· Investor incentive of $2,000 maximum to release subordinate liens
· Subordinate liens to get a maximum of 6% or $6,000 per lien
Does my servicer participate in the HAFA program?
Many major banks participate in HAFA. To find out if your lender participates in this program, go to http://www.Makinghomeaffordable.gov and click on servicer.
What loans do not qualify for HAFA?
· Freddie Mac and Fannie Mae loans
· FHA and VA loans
What are some misconceptions about HAFA?
· To qualify for the program, the borrower should have been denied a loan modification or failed during the loan modification trial period. Not true. A borrower could apply directly. Although, during the HAFA short sale process, the borrower will be offered a loan modification program. At which point, the borrower may or may not accept the loan modification.
· Borrowers NOT in HAMP could not qualify for HAFA. Not true. A borrower could submit a HAFA application and if it meets the HAFA guidelines, then the borrower is qualified. HAFA approval will depend on Investor and PMI approval.
Other important notes on HAFA
· Homes bought from a HAFA short sale cannot be flipped and resold within 90 days of closing.
· Arms length transaction applies. Eg. A seller may not sell the home to his son.
· HAFA approval is subject to investor guidelines.
· Investor guidelines are discretionary.
· HAFA approval is subject to the Private Mortgage Insurance approval.
Though the program sounds rosy just like the earlier programs conceived by the government. The HAFA program’s success is yet to be determined. If the program makes sense to the servicer, investor, PMI company and subordinate lienholders, then there is a chance it may help many homeowners. At the moment, only 25 to 30% of loans qualifies for HAFA. Freddie Mac and Fannie Mae which comprise majority of the loans are disqualified. Like any government program, it will take sometime for all parties involved including the servicers, investors, PMI company, title companies, Realtors to know every detail about the program.
To learn more about HAFA or short sales, go to
http://www.Makinghomeaffordable.gov – Information on HAFA and HAMP
http://www.Makinghomeaffordable.gov/contact servicer.html – List of Servicers involved in HAFA
http://www.HMPadmin.com – Administrative website for servicers involved in HAFA and HAMP
http://www.Realtor.org/realtors/basics short sales?wt.mc id=rd0041 – Realtor site with short sale information
http://link.brightcove.com/services/player/bcpid74425227001 – Realtor HAFA video, April 2010

Entry filed under: Arizona Real Estate, Chandler Real Estate, Foreclosures & Short Sales, Phoenix Real Estate, Real Estate Deals. Tags: , , , , , , , , .

GOVERNMENT FORECLOSURE RESCUE PROGRAM – HAFA Market Summary for April 2010 in Metro Phoenix, AZ

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