Focus on Foreclosures: How the Home Affordable Foreclosure Alternatives Program (HAFA) Assists Sellers
This post is the first in a series of five this week focusing on foreclosure properties.
In 2009, the Treasury Department introduced the HAFA program to provide a viable option for homeowners who are unable to keep their homes through the existing Home Affordable Modification Program (HAMP). The HAFA program took effect on April 5, 2010 and sunsets on December 31, 2012.
HAFA addresses some of the main concerns that arise when selling a distressed property. First, does the seller truly qualify for hardship as defined by the bank? Secondly, what offers made on the property have the most likely chance of closing? And third, will the seller be released from the deficiency on the loan?
Before HAFA, the seller had no way of knowing these three key pieces of information until they submitted the short sale package to the bank, which had to include an offer to purchase. This left a lot of room for uncertainty as all three had to align to make the offer appealing to the bank. Essentially, when sellers needed help they had to take a shot in dark as to whether a short sale was the right option for them.
How does HAFA address these concerns?
Is the seller approved for hardship?
Traditionally, it would be unknown to the seller if they were determined to be in hardship until the bank received the short sale package with an offer to purchase. This process could take months, and in the end they may not qualify. With HAFA, a seller can be approved for hardship within 14 days before submitting a completed packet and offer to purchase. This in turn helps sellers determine which route is best for their financial future.
What price is the bank looking for?
Traditionally, it was not until the bank approved or disapproved a contract that all parties involved could get a feel for what the bank was looking for to satisfy the lien on the property. Each offer could take months to be reviewed by the bank, and even then sellers could not be certain. With HAFA, the minimum acceptable net proceeds (or MANP) is established when the seller is approved for hardship within 14 days. Knowing this price upfront will draw offers from buyers that have a greater chance of being approved by the bank.
Will the seller be released from deficiency?
When a foreclosure is finished and the home is sold or assessed by an appraisal, for the loss on the mortgage, the deficit amount the bank will not get back from the mortgage balance and expenses due, is called a deficiency. In most states, the lender has an option to get a judgment in this amount against the borrower and this is called a “deficiency judgment”. In addition to the loss of the homeowner’s home he also has the potential of having to repay this judgment in the future. With HAFA, in all states the bank will not be able to come back for the deficiency judgement, giving peace of mind to the seller.
All in all, HAFA gives sellers and their Real Estate Agents important tools to help create a successful transaction and quickly move the seller on to financial freedom.
If you are considering foreclosure and would like to learn more about HAFA, visit the National Association of Realtors Website at http://www.realtor.org/government_affairs/short_sales_hafa.
Our real estate professionals are knowledgeable and respectful. If you would like to meet one-on-one to discuss your financial situation, please contact us. There are many options available for home owners considering foreclosure.
Category: Industry News
