Understanding The HAFA Short Sale
The HAFA is a government sponsored program effective form April 2010, through December 31st 2015. HAFA short sale program has been introduced to provide the relief to short sellers. HAFA short sale program promise the approval of a short sale within ten days and gives the sellers up to $,3000 in cash at closing of the short sale. Because it is a government-sponsored program so it is really complicated.
The HAFA short sale program is abbreviation for Home Affordable Foreclosure Alternatives, and is a part of President Obama’s Making Home Affordable Program. The first step for borrower is to apply for a HAMP, Home Affordable Modification Program.
Rule To Be Eligible For HAMP-
Here are the major rules to be eligible for the HAMP program.
- HAMP program only applies on personal residences.
- The amount of mortgage must be greater than $729,750.
- The borrower should be suffering from financial hardship including loss of income, increased mortgage payments and expected increase in expense.
- The mortgage should be originated before the 1st January, 2009.
- The PITI mortgage payment, including HOA, should be more than 31% of the borrower’s gross monthly income.
The borrower does not qualify for a HAMP program if any of the above rules do not apply. Any “NO” answer to the given rules will cause the rejection of your HAMP qualification.
You will need to find an experience short sale agent for consultancy if you are not eligible for HAMP. If you are qualified for HAMP it does not mean that you are qualified for HAFA. If you want to do a short sale, your goal is to hope that HAMP will turn you down. Then, you will be eligible for HAFA. Or, if accepted into HAMP, and you should stop making your loan payments, you can apply to HAFA. This may sound like silly rules, but it’s the way government works.
How to determine that your Lender Participates in the HAMP Program or not?
It is worth confirming that your lender participate in the HAMP program or not because the lenders that participate in the HAMP program also participate in the HAFA program. All the Fannie Mae and Freddie Mae lenders are supposed to be participate.
The List of HAMP participating Lenders:
- Aurora Loan Services, LLC
- Bank of America, NA
- EMC Mortgage Corporation
- GMAC Mortgage LLC
- Green Tree Servicing LLC
- HomeEq Servicing
- Horizon Bank
- J.P.Morgan Chase Bank, NA
- Chase Home Finance, LLC
- CitiMortgage, Inc
- Countrywide Home Loans Servicing, LP
- PNC Bank, National Association
- Saxon Mortgage Services
- The Golden 1 Credit Union
- US Bank, National Association
- Wachovia Mortgage, FSB
- Wachovia Bank, NA
- Wells Fargo Bank, NA
- Litton Loan Servicing
- Navy Federal Credit Union
- Ocwen Financial Corporation, Inc.
- OneWest Bank
Eligibility Requirements for HAFA Short Sales
A borrower is eligible for HAFA short sale program or can pursue a Deed-in-Lieu-of Foreclosure once he is rejected for a loan modification through the HAMP program. HAFA will preapprove the price of that short sale and give the seller four months to sell the property through a real estate agent.
- HAFA applies to only personal residence. (June 1, 2012, non-owner properties are eligible for HAFA)
- The mortgage amount must be greater than $729,750.
- The seller must be delinquent.
- The mortgage should be originated before the 1st of January, 2009.
- The seller should have been rejected by HAMP for loan modification.
- The sellers with government loan, may qualify under a different program.
Major Advantages to a HAFA Short Sale
- After completing all the requirements seller enjoy some benefits. Some of them are given here:
- The second lenders can no longer try to force a seller to commit short sale mortgage fraud by demanding payments outside of escrow or holding the seller’s first-born as collateral.
- Lender that participates in the HAFA waives the right to opt for a deficiency judgment.
- Junior lender are eligible for receiving up to the 6% of the loan balance or $6,000 to release the loan. As of Feb 1, 2011, the 6% cap has been removed by the U.S. Treasury. *$8,500 effective June 1, 2012.
- Sellers will not be required to make any kind of seller’s contribution. Lenders must agree not to foreclose the home during the short sale process.
- Sellers will receive a government payment of $3,000 at close of escrow to cover relocation expenses.
- Seller’s payments does not need to exceed the 30% ratio after 2/1/2011, with the exception of Fannie Mae, Freddie Mae, VA and FHA loans.
- All the parties are required to sign an affidavit that describes that the seller cannot sell to a person the seller knows or to whom the seller is related. The buyer must also agree not to sell the property for a minimum of 90 days.