Saturday, December 16

Salient Features of The Home Affordable Foreclosure Alternatives Program (Hafa)

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The latest reports on the mortgage front appear to be very disheartening. With as many as 25% Americans living underwater on their mortgages, it has virtually made the federal Government to sit up and assess the emerging situation. Furthermore, it has prompted the State treasury to ink new amendments to the currently operational Home Affordable Modification Program (HAMP). The guidelines of the novel program have in-built mechanisms to provide incentives to lenders for allowing some underwater homeowners to help them to short sale their homes for less than they owe on their current mortgages and freeing them off the hook for the balance loan amounts. It is this salient feature that distinguishes it from the Obama home loan modification plan aimed at making homes more affordable.

Another alternative under the scheme permits the distressed homeowner to deed their property back to the lender that is popularly called the deed-in-lieu of the foreclosure. These are the tenets of the proposed Home Affordability Foreclosure Alternatives Program (HAFA). However, to qualify for the plan, struggling homeowners need to satisfy certain eligibility criteria. These invariably include borrowers who either could not get approved for the already existing Obama Loan Modification Program or the HAMP, secured a trial loan modification refinance but not a permanent one under HAMP or borrowers who have consecutively defaulted twice on their loan modifications. Thus, the HAFA intends to regulate the ongoing foreclosure crisis by providing workable options to struggling homeowners for whom loan modification programs have not been conducive.

Very recently the treasury department issued fresh guidelines for a Home Affordable Foreclosure Alternatives Program (HAFA). This invariably supplements President Obama’s Loan Modification Plan. It is quite interesting to see how the program works. The HAFA offers a composite agenda with a lot of guiding principles and forms that have been structured to reorganize and make things easier for struggling homeowners with regards to short sale and modifications, deed-in-lieu of foreclosure (DIL). Conversely, the HAFA accords a viable option to the existing distressed homeowners who already qualify for the Obama Loan Modification Program but are still not in a position to salvage their homes. It classically, utilizes the previous information of financial hardships that is already garnered when considered for a loan modification earlier. The HAFA goes a step further in facilitating pre-approvals for terms that relate to short sales prior to listing of the property. These invariably include the minimum adequate net proceeds. Guidelines additionally forbid loan providers to desist from reducing real estate commission complied upon in the listing agreement, with a ceiling of up to 6%. Besides, the conditions of the Home Affordable Foreclosure Alternatives Program (HAFA) also stipulate that borrowers be fully discharged from the any obligations of the first mortgage debt. The HAFA, additionally, provides for setting up innovative standard procedures, documents and deadlines and even offers financial rewards to all the parties involved. That includes $1500 to distressed homeowners towards relocation assistance, $1000 to servicers for covering up administrative and processing costs and up to $1000 for investors who facilitate unto $3000 towards short sale proceeds which is to be distributed sub-ordinate lien holders in a ratio of 1:3.

Hence, the proposed Home Affordable Foreclosure Alternatives Program (HAFA) which is very much a part of the Making Home Affordable Program lays down terms and conditions for regulating short sale and deed-in-lieu of foreclosure. As per the rules of the HAFA, a distressed homeowner could get rid of his property at a price that is considerably less than the loan amount due on the mortgage. Over and above, the value of the home permitted to be sold is pre-determined through a process of appraisal conducted by an independent real estate agent. Thus, the homeowner is not the deciding authority for the minimum price. Contrary to this, in a deed-in-lieu of foreclosure, the house owner is required to surrender his property along with its title back to the loan provider. Consequently, in a short sale the lenders do not have to go through the process of a foreclosure on a property that has total unpaid dues in the range of $20,000 to $40,000. Besides, the credit of a borrower is not affected much in a short sale as much as it is in a foreclosure.

Author Resource: The government has announced the home affordable foreclosure alternatives program (HAFA), which provides financial incentives help to persons who are facing foreclosure. For more visit and apply for program.


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