What is Home Affordable Foreclosure Alternative (HAFA)?
On April 5, 2010, the Treasury Department implemented the Home Affordable Foreclosure Alternative Program, also known as “HAFA,” to provide a viable option for homeowners who are unable to keep their homes through Home Affordable Modification Program (HAMP). HAFA provides incentives to lenders to allow homeowners who can’t afford their mortgage payments to gracefully “exit” their home either through a short sale or deed in lieu of foreclosure. Generally, the servicer prefers to see a homeowner make a good faith effort to sell the home before accepting a deed in lieu of foreclosure. Also the property must be free of additional liens and encumbrances.
Benefits to the homeowner from the HAFA program include:
- up to $10,000 to seller for relocation assistance
- no phantom tax on forgiven house debt
- no deficiency judgements
- no promissory notes
Second lien holders and other subordinate lien holders are incentivized to participate but are not required. Should subordinate lien holders elect not to participate in HAFA, they have the right to sue the homeowner and first lien holder under their rights as a creditor.
All servicers that participate in HAMP are also mandated to comply with HAFA. A list of HAFA servicers can be found on the Making Home Affordable website.
- Loan must be delinquent or will become delinquent in foreseeable future.
- Homeowner obtained mortgage on or before January 1, 2009.
- Homeowner has lived in home for the past 12 months.
- Homeowner has not purchased a new home within the past 12 months.
- First mortgage is worth less than $729,750.
- Homeowner must document financial hardship.
- Homeowner must not have been convicted of a crime related to a real estate transaction.
*Eligibility is for guidance purposes only. HAFA guidelines are updated all the time. Please google "HAFA" for more information or contact us and we will get you the latest HAFA guidelines.