Posted on Tuesday, April 6, 2010
The Philosophy behind HAFA (Home Affordable Foreclosure Alternative under Making Home Affordable) is to provide financial incentives for borrowers, servicers and investors to do short sale/deed in lieu over foreclosure with the goal of saving time and money, preserving property condition and value, and benefitting borrower, servicer, investor and community.
The History? HAFA was first announced May 14, 2009
Guidance/forms were issued November 30, 2009. April 5th is the deadilne for lenders and servicers to get on board.
HAFA is not for everyone. It applies to HAMP eligible loans. Supplement Directive 09-09, issued March 26, 2010 and effective April 5, 2010 eexplains.
HAFA Eligibility requirements (same as HAMP) include that the property must be an owner occupied primary residence, the loan must be a first mortgage closed before January 1, 2009, the loan must be in default or foreseeable risk (a probably as it encourages others to default – moral hazard), the loan must be under $729,750, and the goal is to get the payment to not more than 31% of gross income which the borrower has to prove he can afford.
“Benefits” of HAFA over traditional SS/DIL;
Compliments HAMP – uses same financial and hardship information
Pre-approved sales price and terms
Can’t require commission reduced. Cant exceed 6%
Standard process, documents, timelines
$ incentives for borrower, servicer, investors
Can require borrower try SS first or allow borrower go direct to DIL.
Must forfeit deficiency.
Requires Servicers To;
Servicers must agree to participate in HAMP, sign SPA with FNMA before October 31, 2010. If already in HAMP, must follow 09-09. Distinguishes GSE v. non-GSE loans.
Develop written policy based on loss severity, market, foreclosure case status, borrower cooperation, etc) and apply the same to all cases.
For borrowers in BK, must consider if borrower asks.
Not ask borrower to do HAFA until try HAMP, then other retention, then HAFA
Consider HAFA within 30 days of borrower request or HAMP default. Then allow 14 days after notified of HAFA. Do property valuation (NPV only applies to eligibility for HAMP/doesn’t predict SS or DIL value under HAFA). Review title. If HAFA denied, written explanation why with toll free number. Submit offer with 3 business days. Approve or not within 10. Cant require close in under 45 days without consent.
Document and report to FNMA
SS Agreement Needs to Include;
“Minimum Acceptable Net Proceeds” can be fixed dollar amount, percentage or market value, percentage of list price. Can increase when SSA is terminated (not less than 120 days)
“Allowable Transaction Costs”
Fixed termination date.
State licensed Realtor required. Commission up to 6%
Specify money to be paid to juniors
$3000 to relocate
Mortgage payment during SSA (can’t exceed 31%)
Foreclosure can proceed but not sale.
Borrower has to try to clear juniors, maintain home, cooperate with Realtor.
Has optional DIL provisions – servicer decides to include or not.
(Use Alternative Request for Short Sale Agreement if get offer first).
DIL Agreement Needs to Include;
Requirement of good title
Must be in writing
Vacate date (has to be more than 30 days after SSA terminates of DIL agreement unless borrower consents)
$3000 to relocate
Mortgage payments during period can’t exceed 31%
Can more foreclosure case forward but not sale
Juniors paid up to 6% of sum due them not to exceed aggregate $6,000. Investors get 1/3 of sums paid to juniors up to $2,000 paid $1 for every $3. Juniors can’t require payment from borrower or Realtors, have to waive deficiency.
MI have to waive right to collect
Servicers gets $1500 to cover cost of handling SS or DIL
All must be on HUD
Credit report; SS = “AU” (account paid in full for less than full balance). DIL = “89” (deed in lieu of foreclosure on defaulted loan).
Expires December 31, 2012.
Will take time to implement. Debt forgiven and relocation money may be taxed. Fraud is a big problem with SS (not arms length, money under the table to borrower, jr).