In early 2009,
the National Association of REALTORS
®
(NAR) urged the U.S. Treasury Department,
the Federal Housing Finance Agency, Fannie Mae and Freddie Mac to improve the
short sales process.
NAR’s concerns were fi rst addressed on May 14, 2009, when the Obama
Administration announced the outline of a program to provide incentives and
uniform procedures for short sales and deeds-in-lieu of foreclosure (DIL)
under the Making Home Affordable Program.
The Obama Administration released guidelines and uniform forms for its Home
Affordable Foreclosure Alternatives Program (HAFA) on November 30, 2009 and
released an updated version on March 26, 2010. April 5, 2010 was the effective
date for the program.
Modifi ed HAFA rules for loans owned or guaranteed by Fannie Mae or Freddie Mac
were still being developed as of April 28, 2010 (check www.REALTOR.org/shortsales
for updates). HAFA does not apply to FHA or VA loans.
HAFA is a program primarily designed for homeowners who are unable to stay in their
home even with a loan modifi cation under the Home Affordable Modifi cation Program
(HAMP). Under HAFA, homeowners may be able to avoid a foreclosure by selling the
home as a “short sale” (where the value of the home is less than the remaining
amount of the mortgage) or by transferring title to the lender through a process called
a “deed-in-lieu of foreclosure.”
HAFA:
• 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 fi nancial and hardship information already collected under HAMP.
• Allows borrowers to receive preapproved 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 fi rst mortgage debt
and, if the subordinate lien holders receive an incentive under HAFA, those debts as
well (no cash contribution, promissory note or defi ciency judgment is allowed).
• Uses a standard process, uniform documents and deadlines.
• Provides fi nancial incentives: $3,000 for borrower relocation assistance; $1,500
for mortgage servicers to cover administrative and processing costs; and up to a
$2,000 match for mortgage investors for allowing a total of up to $6,000 in short
sale proceeds to be distributed to subordinate lien holders (up to 6 percent of the
remaining balance of each junior lien).
• Requires all servicers partici pating 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.
About HAFA