HAFA Guidelines and Rules

Making Home Affordable HAFA Guidelines

HAFA (Home Affordable Foreclosure Alternative Program) is the newest government housing stabilization program that allows struggling homeowners to short sell their home within guidelines and is an extension of the HAMP (Home Affordable Modification Program.)  The HAFA program mandates the banks abide by the following rules in regards to a short sale transaction.

1. A bank/servicer must consider a borrower/seller for a short sale within 30 days after the borrower:

  • Does not qualify for a trial modification plan
  • Does not successfully complete modification trial plan
  • Misses 2 modification mortgage payments
  • Requests a short sale approval or a deed in lieu of foreclose

2. If borrower and property qualify, the servicer/bank sends out the short sale agreement:

  • Borrower/seller has 4 months to sell their home and may be extended for 1 year
  • Once an offer is received the service/bank has 10 days to approve or not and must allow 45 days to close the transaction

3.  The benefits to a HAFA approved homeowner/seller are:

  • Avoids the uncertainty of foreclosure
  • The seller is NOT required or allowed to contribute any monitory sums to the sale, including a personal promissory note or deficiency judgment, if the first and/or second lien holders accept the government paid incentives
  • The terms are “pre-approved” – therefore giving the homeowner a sense of relief that there is time to find a new place to live
  • The seller is given $3,000 to get back on their feet
  • Foreclosure may NOT be completed if the seller/borrower is performing under the “Short Sale Agreement”
  • Mortgage insurers must approve and waive their right to collect additional sums from the seller/borrower
  • If you have a 2nd mortgage, the first mortgage holder is given greater compensation from the government if they give the 2nd lien holder $6,000 or 6% cap per 2nd lien or an aggregate total of $6,000 paid to all junior liens.

Fannie Mae HAFA Guidelines

Fannie Mae announced their HAFA guidelines on June 1, 2010, yet the program is not mandated to be implemented until August 1, 2010.  Servicers are encouraged to implement the Fannie Mae HAFA program earlier than that date.  The Fannie Mae HAFA program sunsets on December 31, 2012, meaning a servicer must receive fully executed required documents before that date to be eligible.

In reviewing the Fannie Mae HAFA servicing guide, many of the guidelines are comparable to the Making Home Affordable HAFA Program for non-GSE servicers, but I did notice there are some huge differences, which include:

          • Real estate agents representing the seller/borrower will be held to a much higher accountability standard
          • All home retention options must be exhausted
          • 60 day rule for properties in active foreclosure
          • Servicer must continue to pursue a pending foreclosure while evaluating a borrower’s eligibility
          • If in active BK the borrower must be considered for a Fannie Mae HAFA short sale or DIL if  requested  by the   borrower, borrower’s legal counsel or BK Trustee
         • BPO (Broker Price Opinion) or appraisal information cannot be disclosed to the borrower
         • If a borrower enters into a Fannie Mae HAFA short sale agreement or HAFA DIL Agreement after foreclosure proceedings have begun, the servicer must consult with legal counsel to determine if the required monthly payments can be accepted without affecting the pending foreclosure
        • Fannie Mae is currently working with mortgage insurers to obtain “delegated authority” to bypass approval by the mortgage insurers

Fannie Mae HAFA Program Summary

The Fannie Mae HAFA program simplifies and streamlines the use of short or “pre-foreclosure” sale and deed-in-lieu of foreclosure (DIL) options by incorporating the following unique features:

           • Complements HAMP by providing alternatives for borrowers who are HAMP eligible (including borrowers facing imminent default);
          • Utilizes verified borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis;
          • Allows the borrower to receive pre-approved short sale terms prior to the property listing;
          • Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement;
          • Releases the successful HAFA borrower from future liability for the debt;
          • Uses standard processes, documents, and timeframes;
          • Provides financial incentives to borrowers, servicers and subordinate lien holders.

Borrower Incentives
• Short sale or DIL – $3,000 to assist with relocation expenses

In most circumstances, the borrower will receive funds at closing of a short sale or within 5 days after the servicer’s acceptance of a DIL, provided the borrower has vacated the property and left it in acceptable condition.

Fore more information, download the FANNIE MAE Servicing Guide Announcement SVC-2010-7.  And of course, if you have any questions or would like to schedule your FREE consultation, please email or call anytime!  We understand and are here to help!

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