What is HAFA?
The Home Affordable Foreclosure Alternatives (HAFA) Program is a government-sponsored initiative led by the US Treasury Department, administered by Fannie Mae with Freddie Mac as compliance agent, and executed by participating lenders to help homeowners avoiding foreclosure, specifically through short sales or deeds-in-lieu.1, 2
What does HAFA stand for?
HAFA stands for Home Affordable Foreclosure Alternatives.3
Does HAFA cover loans guaranteed by Fannie Mae?
No. HAFA is designed only for conventional loans.4
Does HAFA cover loans guaranteed by Freddie Mac?
No. HAFA is designed only for conventional loans.5
Does HAFA cover VA loans?
No. While HAFA is designed only for conventional loans, the Homeowner Assistance Program (HAP) may provide assistance.6
Does HAFA cover FHA loans?
No. HAFA is designed only for conventional loans.7
How do I find out if the homeowner qualifies for HAFA?
You should refer to our “Who is Eligible for HAFA” section for specific details or to Supplemental Directive 09-09 Revised. Here is a list of the general requirements for HAFA eligibility:
· 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-lieu8
What lenders are participating in HAFA?
As a rule, lenders already participating in the Home Affordable Modification Program (HAMP) are participating in HAFA. Some lenders have announced HAFA-specific initiatives. Generally speaking, lenders 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 or see our “Who is Supporting HAFA?” section for specific information.
When does HAFA expire?
HAFA is set to expire December 31, 2012. Like other government initiatives, if the program is successful, it may be extended.
What happens if the bank doesn’t respond within the 10-day timeline set forth by HAFA?
Hopefully, this situation should never arise. Freddie Mac is participating in HAFA as the Compliance Agent.10 This means that Freddie Mac will be monitoring lenders in every step of the HAFA process through a detailed reporting procedure that lenders must follow.11 For more information, refer to Supplemental Directive 09-09 Revised, page 14: Reporting Requirements.
What is the HAFA escalation process?
Issues with the servicer should be addressed by the participating agent, not the homeowner. If you have already worked through your normal channels to contact the servicer and the issue has not been resolved, take the following steps.12 First, you should gather all the necessary information on the homeowner:
· Homeowner's Name
· Property Address
· Servicer Name
· Servicer Loan Number
· Foreclosure Date (if applicable)
· Counselor Name & Organization
· Counselor's Email
· Counselor's Phone
· Counselor's Relationship to Homeowner
Next, if you are an agent, you should contact the HAMP Solution Center for support:
HAMP Solution Center
Phone: 1-866-939-4469
Fax: 1-240-699-3883
escalations@hmpadmin.com
Note: HAFA is part of HAMP
Who completes the Short Sale Agreement (SSA)?
As a requirement of a HAFA short sale, the homeowner must list the property with a licensed real estate professional.13 The Short Sale Agreement must be signed in cooperation with an agent (referred to as "listing broker" in Supplemental Directive 09-09 Revised) so that the servicer knows that the agent — a.k.a. the listing broker — agrees to the terms and conditions of a HAFA short sale.14
Can a homeowner participate in a HAMP Trial Period Plan and agree to a HAFA Short Sale at the same time?
No.15 It is a requirement of HAFA that a homeowner is not participating in a HAMP Trial Period Plan. With regards to HAMP, for homeowners to be eligible, they must:
· Not qualify for a HAMP Trial Period Plan
· Not successfully complete a HAMP Trial Period Plan
· Be delinquent on a HAMP modification by missing at least two consecutive payments16
If the homeowner didn’t apply for HAMP, can they apply for HAFA?
Yes. However, because the homeowner did not apply to HAMP, the servicer will need a completed Request for Modification and Affidavit and evidence that the homeowner’s financial situation meets the 31% income eligibility requirement for financial hardship under HAFA. Please see “Who is Eligible for HAFA?” for more information.17
How does a homeowner qualify for the $3,000 Borrower Relocation Assistance?
This has been inaccurately described as "Cash for Keys." If a homeowner completes a short sale or deed-in-lieu of foreclosure within the guidelines of HAFA, only then do they qualify for $3,000 in assistance to help them with relocation expenses.18 Only one payment per household is given, i.e., even if there are multiple family members short selling their joint residence, they must share the $3,000 between them.
Can the servicer hire a vendor to assist the listing agent?
Yes. However, the hiring of a vendor is entirely optional for the servicer. The Short Sale Agreement contains optional language informing the homeowner that they have retained a vendor to assist the listing agent.19
Will the vendor be paid from fees deducted from the listing agent’s commission?
No. The vendor’s fees can be paid either from the sales proceeds, an amount equal to a percentage of the sales price, or by the servicer outside the transaction. In all cases, the amount the vendor will be paid is decided by the servicer. This rule changed on March 26, 2010 in the Revised Short Sale Agreement.20
Does the homeowner have to remain in the property to be considered for HAFA?
Supplemental Directive 09-09 Revised explains this situation: "The property is the borrower’s principal residence, except that the property can be vacant up to 90 days prior to the date of the Short Sale Agreement (SSA), Alternative Request for Approval of Short Sale (Alternative (RASS) or DIL Agreement if the borrower provides documentation that the borrower was required to relocate at least 100 miles from the property to accept new employment or was transferred by the current employer and there is no evidence indicating that the borrower has purchased a one- to four-unit property 90 days prior to the date of the SSA, Alternative RASS or DIL Agreement."21
If the net proceeds of a short sale exceed the amount due on the first mortgage, do homeowners and servicers get financial incentives?
No. Supplemental Directive 09-09 Revised explains this situation: "[N]o incentives will be paid to the borrower, servicer or investor if the net proceeds from a sale exceed the total amount due on the first mortgage when title is transferred. The amount of any contribution paid by a mortgage insurer or other provider of credit enhancement shall not be considered in determining whether the mortgage was paid in full and whether servicers are eligible for such incentive compensation."22
What are the tax considerations of a HAFA short sale or deed-in-lieu?
The difference between the remaining amount of principal owed and the amount that the servicer receives from the sale must be reported to the Internal Revenue Service (IRS) on Form 1099C, as debt forgiveness. In some cases, debt forgiveness could be taxed as income. The $3,000 Borrower Relocation Assistance may also be reported as income.23 A short sale may have income tax consequences and/or may have a derogatory impact on your credit score.24 Homeowners should contact the IRS or their tax preparer to determine if they may have any tax liability.
In the case of a deed-in-lieu, the difference between the remaining amount of principal you owe and the current market value of the property must be reported to the Internal Revenue Service (IRS) on Form 1099‐C as debt forgiveness. In some cases, debt forgiveness could be taxed as income. The $3,000 Borrower Relocation Assistance may also be reported as income.25 Homeowners should contact the IRS or their tax preparer to determine if they may have any tax liability.
Last updated: 6 April 2010
Sources:
1. Making Home Affordable. Supplemental Directive 09-09 Revised "Background" p. 1 (2010): https://www.hmpadmin.com/portal/docs/hafa/sd0909r.pdf
Updated March 26, 2010
2. Ibid. "Compliance Agent" p. 15
3. Ibid. "Background" p. 1
4. Ibid.
5. Ibid.
6. Ibid.
7. Ibid.
8. Ibid. "HAFA Consideraton" p. 4
9. Ibid. "Background" p. 2
10. Ibid. "Compliance Agent" p. 15
11. Ibid. "Reporting Requirements" p. 14
12. Making Home Affordable. Short Sale Agreement (Exhibit A) p. 7 (2010): http://www.hmpadmin.co/portal/docs/hafa/hafaletters_ssagreement.doc
Updated March 26, 2010
13. Making Home Affordable. “Counselor Escalation Process” (2009): https://www.hmpadmin.com/portal/resources/escalation.html
14. Making Home Affordable. Short Sale Agreement (Exhibit A) p. 1 (2010): http://www.hmpadmin.co/portal/docs/hafa/hafaletters_ssagreement.doc
Updated March 26, 2010
15. Making Home Affordable. Supplemental Directive 09-09 Revised "Short Sale Agreement" p. 7 (2010): https://www.hmpadmin.com/portal/docs/hafa/sd0909r.pdf
Updated March 26, 2010
16. Ibid. "HAFA Consideraton" p. 4
17. Ibid.
18. Ibid. "Incentive Compensation" p. 12
19. Making Home Affordable. Short Sale Agreement (Exhibit A) p. 5 (2010): http://www.hmpadmin.co/portal/docs/hafa/hafaletters_ssagreement.doc
Updated March 26, 2010
20. Ibid. p. 22, 30
21. Making Home Affordable. Supplemental Directive 09-09 Revised "HAFA Consideration" p. 3 (2010): https://www.hmpadmin.com/portal/docs/hafa/sd0909r.pdf
Updated March 26, 2010
22. Ibid. "Incentive Compensation" p. 12
23. Short Sale Agreement (Exhibit A) "Additional Information" p. 3 (2010): http://www.hmpadmin.co/portal/docs/hafa/hafaletters_ssagreement.doc
Updated March 26, 2010
24. Making Home Affordable.Supplemental Directive 09-09 Revised "Short Sale Agreement" p. 8 (2010): https://www.hmpadmin.com/portal/docs/hafa/sd0909r.pdf
25. Deed-in-Lieu Agreement (Exhibit C) "Terms and Conditions" p. 2 (2010): https://www.hmpadmin.com/portal/docs/hafa/hafaletters_dilagreement.doc
Updated March 26, 2010
HAMP/HAFA New Rules
HAMP/HAFA Program
Request for Short Sale Approval
Alternate Request for Short Sale Approval
Deed-in-Lieu of Foreclosure Agreement
