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Home Affordable Foreclosure Alternatives (HAFA) A Quick Overview • Does not take effect until April 5, 2010. • Pertains to 1st Lien Non-GSE Mortgages. • Utilizes borrower´s financial info through HAFA. • Sets limits on lender response time. • Lender forfeits ability to pursue deficiency judgment. • Caps claims of subordinate lenders. Requirements Loan is eligible if all of the following conditionsare met: • Property is borrower´s principal residence • Loan is a 1st lien mortgage • Originated before Jan 1, 2009 • Mortgage is delinquent or default is reasonably foreseeable • Current unpaid balance is equal to or less than $729,750 • Borrower´s total monthly mortgage payment exceeds 31% of borrower´s gross income Process & Timelines • Servicers must consider HAMP eligible borrower for HAFA within 30 days of the date the borrower: • Does not qualify for trial period plan • Does not successfully complete trial period plan • Is delinquent on HAMP modification by missing at least two consecutive payments • Requests a short sale or Deed-in-Lieu • Servicer must proactively notify the borrower in writing of the availability of a short sale and deed-in-lieu • Servicer allows borrower 14 days to contact them with interest in these options • After this timeline servicer has no further obligation to extend the HAFA offer • Servicer issues Short Sale Agreement (SSA) along with request for Approval of Short Sale (RASS) Document • The servicer will send documents either proactively or at the r of the borrower • Once SSA is issued the borrower must sign and return SSA within 14 days of its effective date, along with real estate broker listing agreement and information regarding subordinate liens • Within three days following the receipt of an executed purchase offer, the borrower (or listing broker) must submit a completed RASS to the servicer • Servicers have 10 days to accept or deny a short sale request (RASS). Incentives • $1,500 to Borrowers for relocation costs. • Will be deducted from gross sale proceeds at closing. • Servicer may not charge borrower any processing fees and MUST pay all out-of-pocket expenses. • $1,000 to Investors for subordinate lien holder payoff.• For every three dollars spent to release liens, buyer or investor is reimbursed one dollar - capped at $3,000. Highlights • Lender waives rights to deficiency judgment • Servicer must assess the property value and cannot charge the borrower in advance. • May be added to outstanding debt if transaction is not completed. • Servicer must review title and cannot charge the borrower in advance. • May be added to outstanding debt if transaction isnot completed. • Servicer must notify borrower of Short Sale and Deed-in-Lieu as foreclosure avoidance alternatives. • It is a requirement that the property be listed with a licensed real estate professional. • Prohibits servicer from requiring, as a condition of short sale approval, a reduction in the real estate commission previously agreed upon in the listing agreement (not to exceed 6% of contract sales price) Causes for Termination • Borrower´s financial situation improves. • Borrower or listing broker fails to act in good faith in listing, marketing and closing the sale. • Significant change occurs in property condition or value. • Misrepresentation or fraud. • Borrower files for bankruptcy. • Litigation is initiated or threatened that would affect the title (i.e. divorce)
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