HAFA Short Sales – Who Qualifies and What is It?
HAFA stands for Home Affordable Foreclosure Alternatives and is becoming more and more popular with homeowners, especially homeowners who are keeping informed on short selling a home in general and have heard or been told about HAFA short sales in particular. Not enough short sale Realtors acting as a short sale listing agent are familiar with the HAFA short sales program and perhaps they too will find this overview helpful.
The HAFA program is an alternative to foreclosure and is a way for homeowners to be able to either short selling a home or to turn the keys to their home into the lender which is otherwise known as a deed-in-lieu of foreclosure process and whereby the lender will pay the homeowner up to a certain dollar amount to vacate the property. This helps the homeowner with moving expenses because if the homeowner is in the position of short selling a home or turning in their keys due to a hardship, they more than likely do not have the funds to be able to relocate. Most Nationwide Banks and Mortgage Lenders participate in this program and being a short sale listing agent with Palm Beach Premier Real Estate requires knowledge of the HAFA short sales program and how it works.
Some advantages to the HAFA Short Sales program are as follows:
- Financial relocation assistance for Borrowers (dollar amounts vary).
- Borrowers must be allowed to attempt HAFA Short Sales or the Deed-in-Lieu of foreclosure process before the Lender may move forward with a foreclosure.
- Any future liability for the first mortgage debt after short selling a home will be released and the Borrower will not be asked to sign a promissory note, will not be asked for a contribution of cash at closing and the Borrower will not be asked to complete a deficiency judgment in order to compete the short sale or Deed-In-Lieu of foreclosure process.
- If there are any second mortgages or lien holders (also known as junior lien holders), that participate in the HAFA short sales program, they must also follow the above guidelines as the first mortgage and release the homeowner/borrower from future liability when short selling a home under the program.
Hardships abound right now due to economic factors and there are certain basic qualifications that will be required to be met in order for a homeowner short selling a home or completing the Deed-In-Lieu of Foreclosure process under the HAFA program:
- The home must be the borrower’s primary residence. This means that this is their home where they live with consistency. In Florida, we call it their homesteaded property.
- The first mortgage had to have been taken out prior to January 1, 2009.
- The mortgage is not currently being paid or there is a reasonable chance in the near foreseeable future that the mortgage will become delinquent.
- The maximum unpaid principal balance does not exceed $729,750 on a single family home. There are higher limits for 2 to 4 unit properties such as duplex, triplex and fourplex properties – but remember, the Borrower must be residing in one of the units as their primary residence or homesteaded property.
- The borrower’s income is not sufficient to cover the monthly mortgage payments in that they exceed 31% of the gross income of the Borrower.
- It goes without saying that the Borrower must request the HAFA Short sales program at the time of the HAFA Short Sales initiation at the time of short selling a home or the Deed-In-Lieu of foreclosure process in order to qualify. It is important that this be brought up in the initial meeting with the short sale listing agent
Provided that the above criteria are met both by the borrower and short sale lender (as well as the mortgage itself), then the lender will consider the HAFA program as an alternative. The borrower may also have to have been either denied on the HAMP program – HAMP is Home Affordable Modification Program – does not complete the HAMP trial period successfully, or is delinquent on the HAMP modification of more than 2 months. . HAMP was designed to help homeowners to modify their existing mortgage which is a FHA insured or guaranteed loan (therefore not all mortgages are eligible).
This program lowers the monthly mortgage payment for a borrower to 31% debt ratio (which is 31% gross – pre-tax – income) to make the mortgage payments more affordable. The borrower must have documentation that supports the fact that they can afford the modified payments in the HAMP program.
An extension to the HAMP program is the PRA program. PRA stands for Principal Reduction Alternative. This program was created to help homeowners who are “under water”. They own their home which is now worth less than what they owe on it. Under this program, all the guidelines noted above for HAFA apply and the loan cannot be Fannie Mae or Freddie Mac owned or guaranteed in order to qualify.
While some say that completing a short sale in and of themselves is a complex process, the HAFA short sales program streamlines and makes the process more efficient. Having the best and most experienced professionals at your side with a short sale listing agent that understands the short sale process is imperative when short selling a home and doing HAFA short sales is no exception.
For more information of HAFA short sales or avoiding having to do a Deed-In-Lieu of Foreclosure process you can visit the HUD website here or here for HAMPor PRA programs – or for one-on-one short sale advice and short sale help if considering short selling a home give short sale listing agent Gia or Grant Freer at Palm Beach Premier Real Estate a call in confidence at 561.395.8418 or email us at Info@PalmBeachPremierRealEstate.com for more information.
It is absolutely critical that before you make a choice between short selling a home performing one of the HAFA short sales or considering a deed-in-lieu of foreclosure process that you speak with an experienced short sale listing agent or a Real Estate Attorney to discuss the options that are available to you. Selecting the right short sale listing agent with the knowledge, familiarity and experience can be the difference between a short sale bank approval or a denial of your short sale.
If you are a short sale realtor and would like to join our team as a short sale listing agent please email Info@PBPrealestate.com and include your resume. To be a short sale listing agent with Palm Beach Premier Real Estate requires a proven track record of relevant experience as well as a familiarity with HAFA short sales – we would recommend that any short sale realtors looking to understand more about how HAFA short sales work and the nuances involved contact their Board of Realtors and enquire about courses available.