Summary
The Home Affordable Foreclosure Alternatives (HAFA) Program offers a set of guidelines and financial incentives to lenders in order to streamline and simplify the short sale and deed-in-lieu of foreclosure process. The program is overseen by the US Treasury Department, administered by Fannie Mae, regulated by Freddie Mac and executed by participating lending institutions. On April 5, 2010, the program will activate and run until December 31, 2012, unless extended.
On June 1, 2010 Fannie Mae and Freddie Mac announced full support of HAFA for loans owned or guarunteed through them. The program will begin August 1, 2010 and shares the HAFA Program's projected expiration date of December 31, 2012.1, 2 This announcement changed the existing condition preventing loans owned or guarunteed through the two government-serviced enterprises from being assisted through HAFA.
What is HAFA?
The Home Affordable Foreclosure Alternatives (HAFA) Program is a government-sponsored initiative overseen by the US Treasury Department and administered by Fannie Mae assisting all Home Affordable Modification Program (HAMP)-eligible homeowners in avoiding foreclosure, specifically through short sales or deeds-in-lieu of foreclosure.3 HAFA was announced on November 30, 2009 in a HAMP Update titled Introducing the Home Affordable Foreclosure Alternatives Program.4
HAFA directs lenders to assist eligible homeowners in quickly and effectively implementing short sales or deeds-in-lieu by providing financial incentives to lenders that carry out foreclosure alternatives through the program's guidelines set forth in Supplemental Directive 10-18 Revised (revised December 28, 2010).5 The program was introduced in part with the intent to remove the stigma from short sales and help keep communities from being destroyed through massive foreclosures.
Details of HAFA
HAFA was introduced to simplify and streamline the short sale process. HAFA accomplishes this in the following ways:
- Compliments HAMP by providing viable alternatives for borrowers who are HAMP-eligible
- Uses standard processes, documents and timeframes
- Provides financial incentives to borrowers, servicers and investors
- Requires that borrowers be fully released from future liability for the debt
- Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis
- Allows the borrower to receive pre-approved short sale terms prior to the property listing
- Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement6
HAFA provides financial incentives as follows:
- Homeowners qualify for $3,000 (updated March 26, 2010; was previously $1,500) in Borrower Relocation Assistance after a short sale or deed-in-lieu has been completed (may classify as taxable income in some cases7)
- Financial incentives for servicers participating in the program include up to $1,500 (updated March 26, 2010; was previously $1,000) servicing bonus upon completion of a short sale or deed-in-lieu
- Financial incentives for investors include up to $2,000 (updated December 28, 2010; eliminated 6% cap) for those who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders. This reimbursement will be earned on a one-for-three matching basis8
- Lenders pay all servicing fees — homeowners have no out-of-pocket expenses9
There are two additional documents which provide detailed technical information on data related to HAFA and the HAFA reporting procedures for servicers:
- HAFA Data Elements (Exhibit D) is a series of tables detailing specific reporting procedure data for servicers. It is available at the end of Supplemental Directive 09-09 Revised. This is a document for servicers
- The HAFA Data Dictionary, a spreadsheet in Excel format coordinating with HAFA Data Elements (Exhibit D) that catalogues all of the data elements and associated metadata for the program, including the names, definitions, allowable values, and data types. It also defines the functional areas where the data elements are being used.10 This is a document for servicers
For more information on servicer reporting procedures and requirements, see "Reporting Requirements" on page 14 in Supplemental Directive 09-09 Revised.
Who is Eligible for HAFA?
Most homeowners facing financial hardship are eligible. As a rule, if a homeowner is eligible for HAMP but cannot pay the mortgage, then he or she is eligible for an assisted short sale through HAFA. Servicers must consider possible HAMP eligible borrowers for HAFA within 30 calendar days if the borrower has met one or more of the following criteria11:
- Does not qualify for a HAMP Trial Period Plan
- Does not successfully complete a HAMP Trial Period Plan
- Is delinquent on a HAMP modification by missing at least two consecutive payments
- Requests a short sale or deed-in-lieu12
For a loan to qualify, it must meet the following criteria:
- The property is the borrower's principal residence
- The mortgage loan is a first lien mortgage originated on or before January 1, 2009
- The mortgage is delinquent or default is reasonably foreseeable
- The current unpaid principal balance is equal to or less than $729,750
- Short Sale Agreement (Exhibit A)14
- Request for Approval of Short Sale (Exhibit A1)15
- Alternative Request for Approval of Short Sale (Exhibit B)16
- Bank of America announced in March its commitment to participate in HAFA when it activates. It has been preparing for a more streamlined process for months though its support of HAMP
- Bank of America's short sale processor Equator announced the launch of a brand-new best practices software workflow solutions directly related to HAFA19
- Bank of America's HAFA website gives homeowners details on their support of the program
- Citibank is participating in HAMP, which is a requirement for participating in HAFA
- CitiMortgage has launched a pilot Foreclosure Alternatives Program that assists its borrowers in avoiding foreclosure by offering a deed-in-lieu that allows homeowners to remain in their homes for six months after they agree to sign over their property deeds to CitiMortgage. The pilot program offers relocation counseling and a minimun of $1,000 in relocation assistance. Currently the program is available in Texas, Florida, Illinois, Michigan, New Jersey, and Ohio.20
- Chase has announced their support of HAFA and posted a Short Sale Information Packet on their website
- GMAC has started a program to preemptively contact borrowers who are not eligible for loan modifications under HAMP and offering alternatives through HAFA and claims a three-day turnaround on short sale applications21
- Wachovia is participating in HAMP, which is a requirement for participating in HAFA
- Wells Fargo is participating in HAMP, which is a requirement for participating in HAFA
- Wells Fargo has been ramping up efforts to assist homeowners by actively contacting those who are facing hardships22
- Wells Fargo announced on April 14, 2010 their support of HAFA and ongoing support for foreclosure avoidance programs. Wells Fargo has more than 17,400 U.S. staff focused on home retention and foreclosure avoidance.23
- Fannie Mae. Announcement SVC-2010-07. "Introduction of Fannie Mae's Home Affordable Foreclosure Alternatives Program." (2010): https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/svc1007.pdf
- Freddie Mac. Publication Number 846. "Home Affordable Foreclosure Alternatives Program." (2010): http://www.freddiemac.com/singlefamily/service/docs/hafa_bulletin_fact_sheet.pdf
- Making Home Affordable. "Home Affordable Foreclosure Alternatives Program: Overview" (2010): https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html
- Updated: March 26, 2010
- Making Home Affordable. HAMP Update "Introducing the Home Affordable Foreclosure Alternatives Program" (2009): https://www.hmpadmin.com/portal/docs/news/2009/hampupdate113009.pdf
- Making Home Affordable. Supplemental Directive 09-09 Revised (2010): https://www.hmpadmin.com/portal/docs/hafa/sd0909r.pdf
- Updated: March 26, 2010
- Making Home Affordable. Supplemental Directive 09-09 Revised. "Background" p. 1 (2010): https://www.hmpadmin.com/portal/docs/hafa/sd0909r.pdf
- Ibid. "Foreclosure Alternatives" p. 3
- Making Home Affordable. Short Sale Agreement (Exhibit A) "Important Information" p. A-3 (2010): https://www.hmpadmin.com/portal/docs/hafa/hafaletters_ssagreement.doc
- Updated: March 26, 2010
- Updated: December 28, 2010
- Making Home Affordable. Supplemental Directive 09-09 Revised "Incentive Compensation" p. 13 (2010): https://www.hmpadmin.com/portal/docs/hafa/sd0909r.pdf
- Updated: March 31, 2010
- Ibid. "General Terms and Conditions" p. 12
- Making Home Affordable. "Home Affordable Foreclosure Alternatives: Overview" (2 April 2010): https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html
- Making Home Affordable. Supplemental Directive 09-09 Revised "HAFA Consideration" p. 4 (2010): https://www.hmpadmin.com/portal/docs/hafa/sd0909r.pdf
- Updated: March 26, 2010
- Making Home Affordable. Supplemental Directive 09-09 Revised "HAFA Consideration" p. 4 (2010): https://www.hmpadmin.com/portal/docs/hafa/sd0909r.pdf
- Updated: March 26, 2010
- Making Home Affordable. Short Sale Agreement (Exhibit A) (2010): https://www.hmpadmin.com/portal/docs/hafa/hafaletters_ssagreement.doc
- Updated: March 26, 2010
- Making Home Affordable. Request for Approval of Short Sale (Exhibit A1) (2010):http://www.hmpadmin.co/portal/docs/hafa/hafaletters_ssapprovalreq.doc
- Updated: March 26, 2010
- Making Home Affordable. Alternative Request for Approval of Short Sale (Exhibit B) (2010): https://www.hmpadmin.com/portal/docs/hafa/hafaletters_ssaltapproval.doc
- Updated: March 26, 2010
- Making Home Affordable. Deed-in-Lieu of Foreclosure Agreement (Exhibit C) (2010): https://www.hmpadmin.com/portal/docs/hafa/hafaletters_dilagreement.doc
- Updated: March 26, 2010
- Making Home Affordable. Supplemental Directive 09-09 "Background" p. 1 (2010): https://www.hmpadmin.com/portal/docs/hafa/sd0909r.pdf
- PR Newswire. “Equator Launches HAFA Solution” (2010): http://www.prnewswire.com/news-releases/equator-launches-hafa-solution-88226552.html
- Citigroup Inc. "Citi to Pilot Foreclosure Alternatives Program to Help Distressed Borrowers" (2010): https://www.citimortgage.com/Mortgage/misc/ForeclosureAlternativesProgramPressRelease.pdf
- HousingWire. “Servicers Streamlining Short Sales as HAFA Nears” (2010): http://www.housingwire.com/2010/03/22/servicers-streamlining-short-sales-as-hafa-nears/
- Wells Fargo. "Wells Fargo Doubles HAMP Completions and Continues Modification Efforts" (2010): https://www.wellsfargo.com/press/2010/20100217_hamp_updates
- Wells Fargo. "Wells Fargo Continues to Deliver Modifications to More Borrowers and Focus on Home Retention Effort." (2010): https://www.wellsfargo.com/press/2010/20100414_HAMP
How to Apply for HAFA
Homeowners interested in utilizing foreclosure alternatives under HAFA are instructed to contact their lender if they meet the eligibility requirements and inform them of their desire to participate. Homeowners unsure of whether or not they meet eligibility requirements should contact a CDPE near them.13
After April 5, 2010 — when HAFA activated — participating lenders should preemptively contact their eligible borrowers within 30 days, either after they meet eligibility requirements or after April 5, 2010. Eligible homeowners will be sent, either preemptively or by request, a Short Sale Agreement that will outline the terms and conditions of a short sale specific to the homeowner.
Homeowners and real estate professionals are encouraged to examine the following documents (updated March 26, 2010) important to the short sale process:
Homeowners and real estate professionals interested in seeking solutions through a deed-in-lieu of foreclosure should examine the following HAFA form (updated March 26, 2010):
These are documents for lenders to send to borrowers. The above documents will give you an idea of the application process and requirements of the program.
Who is Supporting HAFA?
Lenders and loan servicers participating in HAFA must sign a servicer participation agreement with Fannie Mae — the program administrator and financial agent representing the United States in this case — to participate in HAMP by October 3, 2010 (the previous deadline was December 31, 2009. This was updated March 26, 2010)18 Therefore, most lenders are participating and those who are not have the opportunity to at any time. Lenders are developing comprehensive programs in order to prepare for the expected flood of applications for short sales and deeds-in-lieu of foreclosure that HAFA will unleash.
NATIONAL PARTICIPATING SERVICERS
Currently, the HAFA Program has not been activated. Therefore, there is not yet an official list of participating servicers. However, servicers that participate in HAFA are also participating in HAMP. For a full list of servicers participating in HAMP, visit Making Home Affordable's Participating Servicers List.
Last updated: 11 June 2010
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