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The Home Affordable Foreclosure Alternatives (HAFA) program is a government sponsored foreclosure assistance program that provides $3000 of relocation assistance for distressed homeowners.  Of course, most homeowners desiring to short sell their homes would like to qualify for this program.  However, issues may arise that can make qualification for HAFA either difficult or impossible.    The general criteria for HAFA eligibility is as follows:

  • You live in the home or have lived there within the last 12 months.
  • You have a documented financial hardship.
  • You have not purchased a new house within the last 12 months.
  • Your first mortgage is less than $729,750.
  • You obtained your mortgage on or before January 1, 2009.
  • You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.
  • The first problem that can arise is that you must live in the home or have lived there within the past 12 months.  However, some lenders refuse to approve HAFA if the house is vacant at the time that the lender’s valuation was completed.  In other words, if you move out of the house prior to the lender’s broker price opinion (BPO) and the agent completing the BPO makes a note that the house is vacant, this could cause a problem.  Not all lenders are strict about this but there are some that are very strict.  Another problem arises when there are 2 liens involved.  Second lien holders that participate in HAFA are required to provide a full release for the amount forgiven.  The problem is that there is no regulation that states that second lien holders have to participate in HAFA or agree to a short sale at all.  Stubborn lenders or collection companies that have acquired an interest in the lien can simply not cooperate at all.  Another HUGE problem is the restriction on how much a first lien holder can allocate to a second lien holder in a short sale transaction.  Prior to March of 2012 the first lien holder could allocate no more than $6,000 to the second lien holder, period.  This means that if a second lien holder agrees to a short sale but issues an approval for more than $6,000 the HAFA short sale is in jeopardy.  If the real estate agent negotiating with the second lender cannot get them to reduce their approval to $6,000 the HAFA short sale will not be accepted and the homeowner will be forced to obtain a traditional short sale approval.  It does not matter if the buyer or real estate agent or seller is willing to contribute the difference, the HUD cannot state any more than $6,000.  The HAFA guidelines have recently changed to allow the second lien holder up to $8500, however, most lenders have not implemented this change in their systems yet and are still holding to the $6,000 limit.  For example, Citi Mortgage indicated that although they are aware of the HAFA guidelines changing, their system will not be ready to process this change until the middle or end of June 2012.

    In summary, homeowners need to realize that while most real estate agents will work very diligently to try and obtain a HAFA short sale for them, the circumstances might be such that HAFA is not possible.

    July 23rd, 2017

    Posted In: Uncategorized

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