If you’re considering a short sale to sell a house that you can no longer afford, or even if you’re facing the very real prospect of foreclosure, you may have an alternative. It’s a federal government program called the Home Affordable Foreclosure Alternatives, or HAFA for short.
The program was launched by the federal government in 2009 in response to the housing meltdown. It’s purpose is to give people a chance to get out from underneath their mortgages without all of the usual unpleasantness that goes with disposing of an underwater mortgage (house value less than the amount of the mortgage it secures).
A program that allows you to exit gracefully
HAFA covers loans that are either owned or guaranteed by either Fannie Mae or Freddie Mac, or serviced by more than 100 mortgage servicing companies that participate in the program. There’s an excellent chance that the mortgage on your home is eligible.
The program provides two options for mortgage debt relief: a short sale or deed in lieu of foreclosure.
Short sale. Under a short sale, the lender approves the sale of your home even though the proceeds of the sale will be insufficient to payoff the full balance of the mortgage. This arrangement is available under HAFA, and the deficiencyâ”the amount of the mortgage not satisfied by the proceeds from the sale of the homeâ”is guaranteed to be waived by the mortgage servicer. In addition, you won’t be held liable for the amount of the deficiency, and you will be completely released from any further responsibility for the remaining loan balance.
Deed in lieu. This is the second option. You don’t sell the home, but instead you give the title to the property back to the mortgage lender.
Program benefits
As anyone who’s ever been through it can attest, foreclosure is a messy affair. And short sales can leave you at the mercy of an uncooperative bank. HAFA helps you with both and makes the whole process easier.
In addition, HAFA provides other valuable benefits:
Free housing counseling. Many homeowners who are underwater on their mortgages don’t know what to do or where to turn to improve their circumstances. Under HAFA, you will be given advice from HUD approved housing counselors and licensed real estate professionals who can give you the direction you need. This service is available to you for free.
Less effect on your credit score. A short sale or deed in lieu will have less of a negative effect on your credit scores than traditional short sales and foreclosures, though the program website doesn’t explain exactly why that is.
Relocation assistance. After closing on the sale of your home, you may be eligible to receive a $3,000 relocation assistance package.
Qualifying for HAFA
There are qualifications for HAFA. According to the program guidelines you must meet all of the following:
- “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 program isn’t specific on what constitutes a financial hardshipâ, but it’s also clear from the restrictions that you won’t be able to use HAFA as a way to engineer the sale of one house for the purpose of buying a new one. The program is specifically aimed at homeowners who are in distressed circumstances.
Whether it’s a likely foreclosure or the prospect of a short sale, check out the HAFA Program if you think it could help in your situation.
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