As many of you know, the treasury department developed HAMP (Home Affordable Modification Program) to help streamline modifications for borrowers who are struggling financially.  This, of course, has been a failure on many levels because it can be difficult to qualify for and often times provides only a ‘band-aid’.  In response to this failure, HAFA (Home Affordable Foreclosure Alternatives) has been introduced and offers some interesting benefits to borrowers who are doing short sales and can qualify for the program.

HAFA (Home Affordable Foreclosure Alternatives) is available to all HAMP-eligible borrowers who: 1) do not qualify for a Modification Trial Period Plan; 2) do not successfully complete a Trial Period Plan; 3) miss at least two consecutive payment during a HAMP modification; or, 4) request a short sale or deed-in-lieu.

HAFA Provisions:

• 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 in connection with consideration of a loan modification.
• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
• $3,000 for borrower relocation assistance (this $$ goes to the seller/borrower after the short sale is complete)
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
• Uses standard processes, documents, and timeframes/deadlines.
• Provides the following financial incentives:
• $1,500 for servicers to cover administrative and processing costs;
• Up to $2,000 for investors who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a one-for-three matching basis.

Related posts:

1. San Diego Short Sale 101
2. Obama Administration Announces Financial Incentives and Uniform Process for Short Sales
3. Why do lenders prefer a loan modification over a foreclosure?
4. Lenders More Open to Short Sales
5. Loan Modification Options – Things You Should Know