What is HAFA?
HAFA (Home Affordable Foreclosure Alternatives) is a government program for distressed homeowners to sell their homes to avoid foreclosure, even if the sales price is not enough to pay off their existing mortgage loans. Under HAFA, a participating lender will pre-approve the terms of a short sale and give the borrower at least 4 months to market and sell the property using a licensed real estate professional.
The eligibility requirements for a HAFA short sale include the following:
- You have a documented financial hardship.
- You have not purchased a new house within the last 12 months.
- Your first mortgage is less than $729,750.
- You obtained your mortgage on or before January 1, 2009
The government incentives under HAFA are as follows:
- $3,000 to borrower for relocation expenses;
Each participating lender will have its own written policy for approving or rejecting a HAFA short sale, based on factors such as the severity of the loss, market conditions, the borrower’s motivation and cooperation, property valuation, and title review.
The Short Sale Agreement (HAFA SSA) will include, among other things, the following:
- Either a list price or net proceeds acceptable to the lender;.
- An agreement to fully release borrower from all liability for repayment of the loan;.
- An agreement not to complete a foreclosure sale if borrower complies with SSA;.
- Amount of acceptable closing costs and up to 6% real estate commission.
- Notice that the sale must be an arm’s length transaction; and.
- Notice that the buyer must agree not to resell the property within 90 days of closing.
Tax, Credit, and Other Consequences
A HAFA short sale may have tax, credit, financial, legal, and other consequences. A homeowner is encouraged to seek the advice of a qualified professional regarding these consequences.
A list of participating lenders is available at http://makinghomeaffordable.gov/contact_servicer.html. Fannie Mae and Freddie Mac have their own HAFA
guidelines for their loans.