There have been significant policy changes made to the HAFA Program (Home Affordable Foreclosure Alternatives) are effective as of today, February 1, 2011. Look these over, and if you or someone you know applied for HAFA in the past and were denied you are now eligible to reapply. According to CDPE.com, the new policies address changes in the following guidelines:
- Monthly Gross Income Verification
- Vacant Property Requirements
- Release of Subordinate Liens
- Timing for Issuance of Short Sale Aggreement
- Timing for Response to Alternative Request for Approval of Short Sale
- Real Estate Brokerage Commissions
- Alternative Deed-in-Lieu Programs
- Borrower Notices Timelines
Why is HAFA Updating its Guidelines?
- Junior Lien Holders not Satisfied with Payouts
- Lack of Efficiency Guidelines
- Lack of Servicer Adherence to Deadlines
These changes will mean a lot in the coming months for gaining approval through HAFA. Through December 2010, only 342 sales were completed since HAFA’s inception. It has gotten off to a rough start like other foreclosure-prevention initiatives. When HAMP was introduced, there was also a lag between introduction and success in the market. The treasury has paid $4.3 million on HAFA compared to $4 billion on HAMP. With the amount of traditional short sales, the less-strict changes that have been made should prove HAFA to come around and improve its numbers.
HAFA Policy Changes in a Nutshell:
- Servicers are no longer required to verify that a borrower’s mortgage payment exceeds 31% of his or her monthly gross income.
- Timelines extended to assist in relocations: Property may now be vacant or rented 12 months prior to short sale application instead of only 90 days.
- Junior Lien Holders Incentivized: Elimination of the 6% payout cap to junior lien holders will reduce pushback , especially for borrowers who owe less than $100,000, which is a great percentage of distressed homeowners.
- Servicers MUST issue a response to borrowers who are requesting HAFA assistance within 30 days
- Alternative Requests for Approval of Short Sale (A-RASS) must receive an approval, disapproval or counter offer within 30 days – increasing a transaction’s efficiency
- The previously excluded deed-in-lieu alternative program is now eligible for certain HAFA benefits, given a successfully executed DIL.
- Borrowers can be evaluated for HAMP and HAFA simultaneously, and if they are not approved for one they won’t have to reapply and start all over again.
These changes will make it somewhat easier on HAFA applicants to get approved. According to CDPE.com, the average loss on a short sale is 15%, the average loss on a foreclosure can be up to 85% on a subprime mortgage. Giving more homeowners the opportunity to decrease the possible loss in a foreclosure situation will make this program worth while for many people looking for options.