Beginning April 5, 2010, the Home Affordable Foreclosure Alternatives (HAFA) program, will offer foreclosure alternatives servicers and borrowers incentives to pursue short sales and deeds in lieu of foreclosure.
HAFA is available to a borrower who meets eligibility requirements for MHAP modification but does not qualify for a modification or unable to complete the modification process, such as not making the required payments during the trial or modification period.
Under HAFA, servicers must determine whether the borrower qualifies for a short sale. A short sale is a sale of the property for less than the amount owed to the lender on the mortgage. Factors the servicer will consider: property's value, expected marketing time for the property, condition of title, and whether net sales proceeds will exceed what would be recovered in a foreclosure.
To encourage a short sale, HAFA offers these incentives:
• Payment to servicers of up to $1,000.
• Payment of up to $1,500 to borrowers for relocation expenses.
• Reimbursement to investors of up to $1,000 for payments made to junior lien holders to release claims.
To determine property value and the minimum acceptable net return for an investor, the servicer must obtain an appraisal performed under the Uniform Standards of Professional Appraisal Practice. The servicer must approve an offer to purchase if net sales proceeds for payment to the servicer are equal to or exceed the minimum acceptable net return determined by the servicer.
HAFA requires servicers to use standardized short sale documents published by HAFA, which give borrowers at least 120 days, but not more than a year, to market and sell the property. If the borrower does not sell the property, the servicer may accept a deed in lieu of foreclosure.
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