About HAFA

About HAFA
HAFA, which will help homeowners who are unable to retain their home under the Home Affordable Modification Program (HAMP), provides incentives in connection with short sales and deeds-in-lieu of foreclosure.
The program:

  • Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
  • Uses borrower financial and hardship information already collected under HAMP.
    Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds and acceptable closing costs).
  • Requires borrowers to be fully released from future liability for the first mortgage debt and, if the subordinate lien holders receives an incentive under HAFA, those debt as well (no cash contribution, promissory note, or deficiency judgment is allowed).
    Uses a standard process, uniform documents, and timeframes/deadlines.
  • Provides financial incentives: $3,000 for borrower relocation assistance; $1,500 for servicers to cover administrative and processing costs; and up to a $2,000 match for investors for allowing a total of up to $6,000 in short sale proceeds to be distributed to junior lien holders (up to 6 percent of the remaining balance of each junior lien).
  • Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.
  • The program sunsets on December 31, 2012.

HAFA TIMELINE
Determination of Eligibility and Notification

Servicers must consider HAMP-eligible borrowers for HAFA within 30 days after the borrower does at least one of the following:

  • Does not qualify for a HAMP trial period plan
  • Does not successfully complete a HAMP trial period plan
  • Is delinquent on a HAMP modification (misses at least 2 consecutive payments)
  • Requests a short sale or DIL

If the servicer determines a borrower is eligible based on its written policy and the program rules, the servicer follows the following steps.
If a servicer has not already discussed a short sale or DIL with the borrower, it must notify the borrower in writing of these options and give the borrower 14 calendar days to respond, orally or in writing. If the borrower does not respond, that ends the servicer’s duty to give a HAFA offer. If the borrower asks for consideration but a short sale or DIL is not available, the servicer must inform the borrower with an explanation and provide a toll-free number.

Short Sale Agreement
The borrower has 14 calendar days from the date of the Short Sale Agreement (SSA) to sign and return it to the servicer. The SSA must give the borrower an initial period of 120 days to sell the house (servicers may extend up to a total of 12 months, if agreed to by the borrower).
Purchase Offer
Within 3 business days of receiving an executed purchase offer, the borrower (or agent) must submit a completed Request for Approval of Short Sale (RASS) to the servicer, including

  • a copy of the sale contract and all addenda
  • buyer documentation of funds or pre-approval/commitment letter from a lender
  • all information on the status of subordinate liens and/or negotiations with subordinate lien holders.

Servicer Approval
Within 10 business days after the servicer receives the RASS and all required attachments, the servicer must approve or deny the request and advise the borrower (with a statement of the reasons in the case of disapproval).
Closing and Lien Release
The servicer may require the closing to take place within a reasonable period after it approves the RASS, but not sooner than 45 days from the date of the sales contract unless the borrower agrees.
The servicer must follow local or state laws to time the release of its first mortgage lien. If local or state law does not require release within a specified time, the servicer must release its first mortgage lien within 30 days. Investors must waive rights to seek deficiency judgments and may not require a promissory note for any deficiency. Rules also apply to participating junior lien holders.