HAFA Home Affordable Foreclosure Alternative Incentive Program

HAFA Home Affordable Foreclosure Alternative Incentive Program

The Home Affordable Foreclosure Alternative (HAFA) Program began April 5, 2010 by the United States Treasury in efforts to entice lenders to approve a short sale rather than pursue a foreclosure. This is an attempt by the Government to help homeowners get out of upside down mortgage, or a mortgage they cannot afford. Banks will be able to write off bad loans while the homeowner gets to avoid a foreclosure which would negatively impact their credit for 7 years.

HAFA short sale incentives benefit all three parties involved:

Borrowers receive $3,000 in cash at closing to go towards relocation expenses. Furthermore, the borrower is entirely forgiven of the debt, including the deficiency that lingers after the sale.

Loan Servicers receive $1,500 after the close of a short sale.

Investors receive a maximum of $2,000 for signing off on overheads to second position lien holders. Also, investors receive $1 for every $3 spent to release junior liens; up to 6% with a maximum of $6,000.

To receive your incentive you must qualify before the conclusion of the short sale:

*In order to qualify for HAFA, borrowers must already meet the central eligibility criteria for the HAMP modification program.

•The Property must be the Homeowner’s primary residence.

•The loan must be the first mortgage on the premises.

•The homeowner must be delinquent in payments or can anticipate nonpayment in the near future.

•The unsettled balance cannot exceed $729,750.00. (Exceptions in some cases for 2 to 4 unit dwellings).

•The borrower’s monthly mortgage payment must be more than 31% of the homeowner’s gross income.

The Incentives are normally paid at the close of escrow of the short sale. The funds ARE considered taxable income. Borrowers are usually not taxed for any deficiency amount forgiven due to the Mortgage Forgiveness Debt Relief Act.