Home Affordable Foreclosure Alternatives Program

What can you tell me about the Home Affordable Foreclosure Alternatives program?

I heard about the Home Affordable Foreclosure Alternatives Program (HAFA) on the radio, and it is supposed to accelerate the short sale process. What are the specifics of this plan?

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Bill's Answer
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The April 2010 guidelines for short sales and deeds in lieu of foreclosure are geared primarily towards the borrower (seller) and the lender (commonly called a service provider or servicer). However, the guidelines offer benefits to buyers of short sale property, too.

Before I answer your question, I need to provide background information on deeds in lieu of foreclosure, short sales, and government programs meant to stabilize prices of homes and assist distressed homeowners.

If you are a homeowner wishing to sell your home, your first task is to verify the type of loan (mortgage) you have. If you do not know, speak with your mortgage specialist, real estate agent, or an attorney in your state who can review your mortgage contract. If the loan is FHA, VA, Fannie Mac, or Freddie Mac, there are new and different provisions of these guidelines, some of which have not been released as of the date of this answer. If you do not have a FHA, VA, Fannie Mac, or Freddie Mac loan, then the guidelines may apply if your servicer is participating in this program. Most are.

To put the Home Affordable Foreclosure Alternatives Program (HAFA) in context, we need to discuss the two primary alternatives to foreclosure.

Deed in Lieu of Foreclosure at a Glance

In a deed in lieu of foreclosure, the property owner gives the property to the lender voluntarily in exchange for the lender canceling the loan. The item transferred is the deed to the property. The lender promises not to initiate foreclosure proceedings, and to terminate any foreclosure proceedings already underway. The lender may or may not agree to forgive any deficiency balance that results from the sale of the property.

An overlooked downside to deeds in lieu of foreclosure in general is the potential for liability for the deficiency balance. However, under HAFA, participating servicers must forgive the deficiency balance for a deed in lieu of foreclosure.

Under federal law, a creditor is required to file a 1099-C whenever it forgives a loan balance greater than $600. This may create a tax liability for the former property owner because it is considered "income." The Mortgage Forgiveness Debt Relief Act provides tax relief for some loans forgiven in 2007 through 2012.

Short Sale at a Glance

In a short sale, the lender agrees to allow the homeowner to sell the property for less than the balance of the loan. The homeowner’s liability for the deficiency balance is an open question. However, in HAFA, the servicer is prohibited from collecting on a deficiency balance. Unlike a deed in lieu of foreclosure, the ownership of the property is not transferred to the mortgage holder, and remains with the owner until the sale closing.

Some lenders choose short sales (as opposed to deeds in lieu of foreclosure) because they do not want to own the distressed property. They would much rather see the owner, who is motivated to sell the property quickly, handle the details of the sale. Also, lenders make money from lending money and are not well equipped to manage properties.

Whether the servicer picks a deed in lieu of foreclosure or a short sale depends on how the lender balances its risks and how it wants the distressed properties to appear on their books. Local laws may have an impact on the decision, too.

Regarding the homeowner’s credit report, Bills.com readers have reported that short sales have either no or a slightly negative impact on the consumer’s credit score. Fair Isaac & Co., however, reports short sales have a severe negative impact on a homeowners credit score. This is in contrast to a foreclosure, which will have a significant impact on a credit score. If you are facing foreclosure and are given the option of a short sale or deed in lieu of foreclosure, do it! The slight impact a short sale may have on a credit score is no reason to avoid a short sale.

Making Home Affordable Program (MHA)

In 2009, the Obama Administration created the Making Home Affordable (MHA) program. An MHA eligibility questionnaire helps homeowners determine if they may qualify. This program has two components: 1) mortgage refinancing through Home Affordable Refinance Program (HARP); and 2) mortgage modification through Home Affordable Modification Program (HAMP). There are provisions that also include homeowners with second mortgages (liens) or even third mortgages. HAMP Borrower FAQs and HAMP Factsheet answer basic questions on the program. The Making Home Affordable Program Web site provides eligibility information, how to request a modification, and additional facts.

Home Affordable Modification Program (HAMP)

HAMP is designed to help homeowners and servicers avoid foreclosure by modifying the terms of the loan to make the mortgage payments affordable for the long-term. The HAMP overview page describes succinctly the requirements that borrowers must meet to be eligible.

The HAMP qualifying criteria include:

  1. Borrower is delinquent on their mortgage or faces imminent risk of default
  2. Property is occupied as borrower's primary residence
  3. Mortgage was originated on or before Jan. 1, 2009 and unpaid principal balance must be no greater than $729,750 for one-unit properties.

The HAMP overview page contains documents the borrower must complete to participate, including: Request for Modification and Affidavit, Hardship Affidavit, and IRS 4506T.

Home Affordable Foreclosure Alternatives (HAFA)

HAFA alternatives are available to all HAMP-eligible borrowers who:

  1. Do not qualify for a Trial Period Plan
  2. Do not successfully complete a Trial Period Plan
  3. Miss at least two consecutive payment during a HAMP modification; or
  4. Request a short sale or deed-in-lieu.

HAFA is complex with numerous guidelines set by the Treasury Dept. These new guidelines do not apply to loans by Fannie Mae, Freddie Mac, FHA or VA because these programs have their own short-sale programs that vary from HAFA.

HAFA provides incentives to mortgage lenders (servicers), seller, and other lien holders. There are deadlines that the mortgage lender and subsequent lien holder have to follow to provide timely progression on the sale of the property. HAFA simplifies and streamlines the short sale and deed in lieu process by providing a standard process flow, minimum performance timeframes, and standard documentation.

HAFA details

A 45-page HAFA Supplemental Directive 09-09: Home Affordable Foreclosure Alternatives – Short Sale and Deed-in-Lieu of Foreclosure Update provides detailed information, including a description of the current guidelines, plus the latest documents you need for the short sale or deed-in-lieu of foreclosure.

As mentioned, servicers need not participate in MHA, HAMP, or HAFA, though most do. However, the reality of the deadlines depends on the rigorousness of the servicer to implement the provisions.

The Treasury Dept. picked Freddie Mac to serve as the compliance agent and Fannie Mae as program administrator. The guidelines for payments is still under development by Fannie Mae as this was written.

Regarding credit reports, the servicer still may report to the consumer credit reporting agencies (i.e., Equifax, Experian, and TransUnion) the account as "full file" status. The 45-page document mentioned above contains further details on the credit reporting.

HAFA for Existing Borrowers (Sellers)

Homeowners selling their homes with a deed in lieu of foreclosure or short sale will benefit from a more streamlined process that includes deadlines the servicers must follow, and a $3,000 payment to cover relocation expenses. Also, borrowers must receive disclosures of costs and net proceeds the servicer requires. The HAFA eligibility requirements are the same as the original HAMP.

The bank or financial institution servicing the mortgage (called a "servicer") must respond to a reasonable offer within 10 business days of receipt of all the required documents including the signed purchase offer and Request to Approve a Short-Sale (RASS). The servicer still has the option to reject the offer. However, this timeline will improve the chances of the borrower and purchaser to finalize the sale quickly.

Closing will occur in no less than 45 days, unless all parties agree to a shorter timeline. The most important provision for the borrower is that if the servicer participates in the HAFA program, and the first and second lien holders accept the incentives, then there can be no deficiency judgment. As with any other debt forgiveness, the servicer will issue any deficiency on IRS Form 1099C and may be taxed as income. As mentioned previously, see the Bills.com resource Mortgage Forgiveness Debt Relief Act to learn how to avoid taxes on forgiven mortgage debt.

Quick Tip

Each state legislature created unique foreclosure and anti-deficiency laws. Follow the links just mentioned to learn the foreclosure rules relevant to you.

HAFA for Purchasers (Buyers)

Read the supplement directive mentioned above for the program terms and conditions for purchaser obligations.

For example, the sale and purchase must be an "arms-length" transaction, which means that the buyer and seller must not be related by marriage, family, or commercial enterprise. The buyer also agrees not to sell the property for 90 days after closing. The 10-day time period is a great improvement because it has been common for purchasers to wait months for servicers to review offers.

Recommendations

If you are considering the sale or purchase a property subject to HAFA, check to see if any recent changes to HAMP or HAFA affect you. The official Making Home Affordable and HAMP websites provide current and creditable information.

In sum, servicers are required to respond to offers within 10 business days of receiving all of the buyer's documents and provide specific reasons for denying the offer if it is rejected. This provides the buyer a relatively quick response to offers, and the ability to attempt to negotiate with the servicer. Also, the seller will receive $3,000 to relocate, which will make it possible for financially distressed homeowners to afford replacement housing.

Debt distressing you? The Bills.com Debt Coach is a no-cost online tool that will analyze your debts and show you the options available to resolve them and the costs and benefits of each.

If you have questions about the documents you are signing and what the consequences may be, consult with an attorney in your state who has experience in real property.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

52 Comments

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  • 35x35
    Dec, 2012
    elena
    Hi Bill, I would so greatly appreciate it if you could answer my question. I bought an investment property in Aug 2006 for $138,500 and have had it rented out ever since. I did an 80-20 loan with 100% financing. It was built in 1974 and needs a complete makeover inside and out. It has also depreciated in value quite a bit, so I am underwater for sure...by a lot. I know that I need to get rid of it because it is becoming a financial hardship for my family to bear every time the tenants call with a problem. The tenants are on a month-to-month lease at this point. HELP! Short sale? Deed in lieu? Foreclosure? Rent-to-own with the tenants IF (big IF) they qualify? I am greatly worried about this deficiency balance as well as the tax liabilities. I am in Charlotte, NC as is the property. The lender is Bank of America. Thank you for your help! Elena
    0 Votes

    • 35x35
      Dec, 2012
      Bill
      You ask excellent questions. I have six reading assignments to help you understand the issues you face:

      After you read each of these articles, I encourage you to ask follow-up questions on the most appropriate page(s).

      0 Votes

  • 35x35
    May, 2012
    Robin
    Bill: We are in a similar situation only we can still afford to make the payments, just don't know why we should consider doing so. We pay $11,500 per year interest only and the loan now is adjusting annual until the payments go up to $2400.00 per month. We haven't touched any of the principal in 6 years and don't know if we should continue to make interest only payments on a $184,000 house that is now worth $102,000. We have tried all the options through BOA to get them to change our loan to a fixed rate, they say we can afford the payment and won't work with us. We have stopped making payment but its only been 1 month, are we making mistake? If so, what are our options? Thanks.
    0 Votes

    • 35x35
      May, 2012
      Bill
      Robyn, by stopping making payments, you're doing great harm to your credit score. Not making payments may or may not influence your lender to modify your loan. I recommend that you speak with a federally approved housing counselor. Call HOPE NOW for a free consultation at 888-995-4673.
      0 Votes

  • 35x35
    Apr, 2012
    Erik
    As of right now I am current on my BOA home loan, I applied for a modification and was denied. I am now starting the short sale process, they told me I could qualify for a HAFA. Times are tough and I am worried I will not make my next payment.
    1. Will missing any payments effect my credit any more or any less in this process?
    2. If i am going to short sale anyway should I be throwing anymore money at anyway?
    3. Do I need a real estate attorney for this process if BOA is willing to forgive the debt already?
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      1. See the Bills.com article Short Sale, Foreclosure & Your Credit Score to learn how a foreclosure impacts a person's credit score.
      2. You ask a question I cannot answer because in some cases, mortgage servicers require homeowners to be in default before they enter the homeowner in a foreclosure alternatives program. Others have the opposite rule. Ask your servicer what the repercussions are for defaulting on your loan.
      3. Are you 100% certain the servicer will forgive the deficiency balance? By 100% certain, I mean, do you have the promise you mentioned in writing? If yes, then you may be able to accomplish this yourself if you are skilled at reading and understanding contracts. If the servicer has made only spoken promises to you, or you otherwise feel you need an aggressive advocate in your corner, then hire a lawyer.

      Yes, a lawyer's time is not cheap, but signing a bad, one-sided deal is very expensive.

      0 Votes

  • 35x35
    Dec, 2011
    Tony
    I filed for disability 6 months ago. My income has drastically dropped and I can not afford the bills and house. Current balance is $94k and last appraisal was $126k. I was approved for a home modification loan and have made the first 2 trial payments, 1 remaining. To be honest even with the modification I won't be able to make ends meet. And now, it appears my marriage will not survive this either. From all I have read here my best option is foreclosure and bankruptcy. Does that sound right?
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      If you will not be able to pay according to the terms of the loan modification, then you be in default, and face foreclosure.

      However, I understand from the information that you provided that your home is worth more than the balance of your loans. If this is the case, then you should seek to sell the property, pay off the loans, and still have money to put in your pocket.

      If this is not the case, then your debt relief options will depend on your total debt and asset position. Certainly it is best to avoid foreclosure, if possible, and bankruptcy is an option available in certain circumstances. If you will still owe money after selling the house, then read more about short sales.
      0 Votes

  • 35x35
    Dec, 2011
    Alan
    There is a very misleading comment here, to the effect that a short sales doesn't affect your credit scores. That's true, because the effect upon the credit scores has already been effected by the missed mortgage payments. However, while short sale, deed in lieu, and foreclosures don't affect the scores themselves, they have a specific effect upon your ability to get credit, which is that you are barred from obtaining a mortgage for at least two years after each of these events, regardless of your credit scores, and up to four years in the event that the defaults were associated with financial mismanagement. As a loan officer, I deal with this issue all the time....and you won't find this rule in any legislation because the rule is established by lenders themselves and no law pertains to this matter.
    0 Votes

    • 35x35
      Dec, 2011
      Bill
      Fannie Mae, Freddie Mac, and the FHA publish guidelines that specify the length of time a person must wait after foreclosure and short sale. It is correct there is no legislation, but none is required. It is also true that individual lenders can apply even stricter standards, if they wish.
      0 Votes

  • 35x35
    Nov, 2011
    Mary
    My home is Freddie Mac/ lender is Wells Fargo. The property is a condo. Wells Fargo recommended a short sale. What rules apply to Freddie Mac properties? I have bankruptcy chap 7.
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      Being in active bankruptcy does not disqualify you from the HAFA short sale program. Read Freddie Mac's HAFA bulletin fact sheet for more information about eligibility. Contact your bankruptcy lawyer and verify that the correct procedures and documents are used in your short sale process. The HAFA program extinguishes any deficiency balance on the participating loan.
      0 Votes

  • 35x35
    Oct, 2011
    Kristen
    We're a young couple who bought our first home in 2007 at a 6.375% APR with more than 100% financing. We received offers for new jobs in another state, and relocated this summer. We are renting here while our home is on the market. It's been 60 days with no bites at a price of $111K, and foreclosures have sold for as little as $30K in our neighborhood. We don't have any money to fix up the unoccupied home, and we're down to our last dollar paying for both mortgage and rent. We're current, but in contact with our mortgage lender. We've been assigned a home preservation specialist, who tells us that we must first be approved for a short sale, then a DIL. We'd really like the DIL, as we don't have any interested buyers after 60 days on the market, plus 6 months on the market in 2010, and we're barely making ends meet. How can I best aggressively pursue a DIL with my mortgage lender?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      You have two tools: Money and words. Keep talking to the mortgage servicer's customer service representatives. Front-line representatives read from a script, but occasionally you will encounter one with experience who will go off-script and may be able to help answer your question. Ask the sympathetic CSR if defaulting will help your cause.

      Consult with a lawyer in your state who has real property experience to learn if foreclosure is a better option for you under the circumstances.
      0 Votes

  • 35x35
    Aug, 2011
    Jared
    We have townhome we have a mortgage on that we have been living in for the past 5 years. Never missed a payment. We are about 15K upside down on that property. Since we've been unable to sell, but we had more children and have run out of room in that place we purchased another home this last month. We qualified for both mortgages and planned on paying both until we can sell the townhome. Unfortunately we have discovered a whole host of issues in the new house that are going to cost me 10K+ to fix, including things that are dangerous to my children. Foundation problems, water, mold, etc... I don't have the money to fix it, and would need to take out a loan to do so. The problem then becomes paying my old mortgage on top of the all the new expenses this new house is incurring. I'm so stressed out. I worry that if I stop paying the old mortgage the month after I closed on the new one I will have fraud charges filed against me because they will think I intended to do a buy and bail, which I definitely did not. Both mortgage are held by the same bank.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      You need to communicate with your lender. It may be prudent to have an attorney advise you on how best to do so. I would think speaking to them before you miss a payment is best

      An attorney can also give you an understanding of the risks you face for fraud. My opinion is that they are minimal, especially if you can prove the unforeseen expenses at the new home.
      0 Votes

  • 35x35
    Jul, 2011
    Edith
    Hi Bill, Going through a divorce, spoke with B of A and was told I qualify for a HAFA Shortsale. I have a pretty good credit score right now. How much would it impact me if I decide to stop paying my mortgage now? Everyone is telling me my credit score is going to be shot, to stop paying already. Thanks!
    0 Votes

  • 35x35
    May, 2011
    Cy
    HAFA and Purchaser question. Does it mean HAFA can be used as a purchase money loan? If yes, what are the qualifications?
    0 Votes

    • 35x35
      May, 2011
      Bill
      HAFA is not a loan origination program. It is not an alternative to an FHA loan, for example. However, for every HAFA seller there is a buyer, so buyers are impacted by the HAFA program. But, as I suggested, if you walk into a loan officer's office and ask, "Do I qualify for a HAFA buyer's loan?" the loan officer will not know what you are talking about. On the other hand, if you say, "I want to buy a property the owner is selling through HAFA," the loan officer will ask a series of questions to learn what mortgage loan you qualify for.
      0 Votes

  • 35x35
    Dec, 2010
    Mandy
    Hello, My husband and I put our home for sale as a short sale in October. We received an offer November 4. We contacted Bank of America right away and gave them all the information they requested. They sent us a letter telling us about the HAFA program which we then applied for. We submitted all of the documentation on December 1st. My guess is we have to wait 30 days to be approved for HAFA and then the 10 days to hear about the offer. Is that correct? And what happens if BOA doesn't abide by the HAFA timeline? Thanks!
    0 Votes

    • 35x35
      Dec, 2010
      Bill
      Mandy, I think that your projected timeline is realistic. Unfortunately, from my research, it does not appear that you have much recourse, should B of A not abide by the HAFA timeline. I think all that you can do is be proactive, attempting to maintain open communication with B of A on the progress of your file.
      0 Votes

  • 35x35
    Dec, 2010
    ruby
    due to change in income and recently diagnosed with M.S.. We would like to move on due to stress.we know that foreclosure is nxt. the fact of not knowing when it will happen is taking a toll on health. wondering the consequences for packing up and leasing an apartment.
    0 Votes

    • 35x35
      Dec, 2010
      See the Bills.com foreclosure page to learn more about foreclosure and its consequences.
      0 Votes

  • 35x35
    Nov, 2010
    How long does a lender have after someone applies for the HAFA program to let them know if they are eligible or not for the program?
    0 Votes

    • 35x35
      Nov, 2010
      Bill
      Servicers are required to respond to offers within 10 business days of receiving all of the buyer's documents and provide specific reasons for denying the offer if it is rejected. However, HAFA lacks teeth to enforce these rules, and it is up to the servicer to self-police HAFA's rules.
      0 Votes

  • 35x35
    Oct, 2010
    Bill
    Masud: 1) Neither is better or worse. 2) You may have liability for the deficiency balance depending on the specifics of your contract for the short sale or deed-in-lieu of foreclosure. Some mortgage servicers write contracts where the mortgagor is responsible for the deficiency, and others do not. Try to negotiate a contract where you are not responsible for the deficiency. 3) Which party is responsible for HOA and utilities depends on the specifics of each situation. If you notified the mortgage servicer that you quit the property and are no longer paying the mortgage, then the mortgage servicer will pay the HOA fees and utilities to protect its interest and prevent a lien or foreclosure (if you state allows this) on the property. 4) Take whatever path that leads you away from liability. If the mortgage servicer is open to a deed-in-lieu of foreclosure, when by all means do so.
    0 Votes

  • 35x35
    Oct, 2010
    Bill
    Carey: If your ex is not on the mortgage, then you can make the decisions as to how to resolve the loan. Regarding a plea of hardship, do not waste your tears. The banks have heard it all before, and at the end of the day it does not matter because I surmise you are still unemployed. Banks may allow a month or two forbearance, but a forbearance cannot be open-ended. A short sale or deed-in-lieu-of-foreclosure are much, much friendlier to a credit score than a foreclosure. If you can avoid a foreclosure with a short sale, do it.
    0 Votes

  • 35x35
    Oct, 2010
    Carey
    I have a home that is only in my name. I was married after we purchased the home, even though we were together and he contributed to the mortgage down payment. I am now ninety days behind, have lost my job and have been turned down for a HAMP modification. I wish to short sale or surrender the deed to the house instead of allowing a foreclosure and my soon to be ex wants to cry hardship and try to force the bank to postpone the forclosure. Can he do this and what are the ramifications of doing this as opposed to short selling or surrendering the deed? Will it affect my credit longer to go into foreclosure as opposed to short selling or deed surrender?
    0 Votes

  • 35x35
    Oct, 2010
    Masud
    I have a condo in NC with 123K+ mortgage on it from one lender only. I have moved to NJ more than a year ago. I did not pay mortgage and Home Oweners Association fees since January, 2010. The condo is on market since June, 2009. Price was reduced by 30K over time but no luck. The condo is vacant for nearly a year but is in excellent shape. I negotiated with lender and was trying to do a short sale through RE Agent but not getting any offer even much below the advertized price. As time passed by I am paying electric bills and probably have to pay property taxes. I am thinking of initiating deed-in-lieu of foreclosure. I have a descent income but I qualify for the financial hardship (verified by the lender). Questios are: 1. Which has more negative impact on credit report-DIL or Short Sale? 2. Can the lender ask for the deficiancy balnce in either case? 3. Who should take care of the Home Oweners Association fees as well as property taxes for 2010 in case of DIL or SS ? 4. Should I go for DIL now if the lender agrees since SS is not working for over a year and I want to get reid of this issue?
    0 Votes

  • 35x35
    Aug, 2010
    grace
    Is it possible for a borrower to bypass the short sale process and go directly to requesting a deed in lieu? Would this be up to the servicer/lender's discretion on whether or not they want to do this? In other words, how much leverage does the borrower have to encourage the servicer/lender to go directly to the deed in lieu process vs. trying to short sale the house? This is for a primary residence with no liens, if that information should be pertinent to the question. Thank you.
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    Your question has me somewhat stumped because there is very little a buyer needs to do to qualify for HAFA. According to the Making Home Affordable document Home Affordable Foreclosure Alternatives – Short Sale and Deed-in-Lieu of Foreclosure Update dated March 26, 2010, you need to submit "Buyer's documentation of funds or buyer's pre-approval or commitment letter on letterhead from a lender." The buyer needs to document he or she is pre-approved and provide that to your real estate agent, who submits this and the sales agreement to the mortgage servicer (Bank of America in your case).
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    Yes, and yes. Each mortgage servicer has its own set of criteria for determining whether to allow a short sale or deed-in-lieu of foreclosure. The standards are unpublished, and probably vary over time. The only thing a consumer can do is ask and negotiate. Keep in mind this wave of foreclosures is unprecedented in recent history, and mortgage servicers are struggling to manage the volume of loan modification, short sale, and deed-in-lieu of foreclosure requests.
    0 Votes

  • 35x35
    Aug, 2010
    Kristi
    I am in the middle of trying to buy a short sale home. We have been waiting for bank approval(Bank of America) and almost there when they came back and said that they will not approve the short sale until the seller takes their name off of the HAFA program. Why would they do this and what is the potential impact of this? Thank you
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    Bank of America does not want to follow the HAFA rules for the property in question for whatever reasons it may have. What impact this may have would be pure speculation on my part. You have some leverage here. Tell your real estate agent that if Bank of America does not proceed with the sale as contracted you will back out of the deal.
    0 Votes

  • 35x35
    Aug, 2010
    Bryan
    I live in AZ, have been relocated across country. Have Freddie Mac mortgage. I cannot afford to pay for mortgage payment and lease, so will have to let the house go unless I can work with the lender. I am applying for HAFA short sale but have asked for a deed-in-lieu, but will not hit the 31% threshold. Otherwise, have no liens and HELOC, primary purchase. Live in AZ. Any alternatives if HAFA does not pull through? Thanks
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    HAFA is not the last word in short sales. Your mortgage servicer will almost certainly offer its own short sale program for homeowners who do not qualify for HAFA.
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    These questions are impossible to answer because each consumer's situation is unique and you do not say whether you defaulted on your mortgage payment to qualify for a short sale or deed in lieu of foreclosure. The general answer is this: If you have a very high score now, a default on mortgage payments will drop your credit score a great deal -- more than 100 points. However, if your credit score is already in the 500s, then a mortgage default will have less of an impact. On the other hand, if you enter a short sale or deed in lieu of foreclosure without defaulting, your credit score will see very little change. How quickly a credit score recovers depends on the activity on your other accounts. If you are current on other active accounts, then your score will rebound faster than if you have only a few non-active accounts.
    0 Votes

  • 35x35
    Aug, 2010
    Farouk
    Please advise how many points will be deducted from my credit report in case of short sale vs in lieu of forclosure. How long each will stay on my credit report ?
    0 Votes

  • 35x35
    Aug, 2010
    Jason
    Hi I am in the middle of a short sale. The bank(Bank of America) just came back and said they won't approve the short sale until the sellers apply for the hafa program. The sellers applied last week. How long will it take for them to be approved for the program? We have grant funding amd I'm afraid we may run out of time.
    0 Votes

  • 35x35
    Jun, 2010
    Sandra
    I entered into a purchase contract subject to a short sale approval, and was told the seller and their bank are participating in the HAFA program. It has been more than 2 months since I have signed my purchase agreement. Within your article, it was noted the servicer has to respond within 10 days, so is this mean that the seller and their bank are not in compliance with the HAFA's guideline?
    0 Votes

  • 35x35
    Jul, 2010
    Bill
    If my understanding of HAFA is correct, the answer to your question is yes.
    0 Votes

  • 35x35
    Jun, 2010
    Bill
    First, study the rental market in your area -- renting may be impossible or a slam-dunk today. The only way of determining if renting is a good idea is to review what is offered today on Craigslist and similar rental marketplaces for properties comparable to yours. Second, if renting is lucrative for you, then find a management firm to handle the details, unless you want to, which I do not recommend. Third, if renting your house will not be cash-flow positive, then consider a short sale or deed in lieu or foreclosure. Either of those options is far more preferable to foreclosure. Finally, I think you have already realized you cannot afford to live in the property with your present income. One possibility is to rent bedrooms to boarders. Again, look to Craigslist to determine the income possibilities for this option.
    0 Votes

  • 35x35
    Jun, 2010
    Jason
    Well maybe you can help lead me in the right direction. Recently my wife and I have decided we are going to split. She found someone else. Anyway we have a property that is about 20k under right now. She would love to rid her name of it but I can not afford it. Its currently through chase and is about 1322 a month. I only bring home about 2500 a month and wonder what my best option would be. I have tried calling the lender and they just say I would have to get her name off the loan and then try and apply for a modification. I just want to avoid destroying my credit by having to foreclose or going bankrupt. I have to many friends already going that route and they cant even rent a nice apartment now. Would our best option be to go for a short sale? I am trying to talk her into renting it but not sure if she will. She is 100 percent disabled through the military and is still able to work. So she brings home about 5 or 6k a month. If I could keep the house and rent it I would but I dont know what my options would be since my income is not near enough to live in it. Meaning I wouldnt qualify to make it my primary home. Thanks in advance. Jason
    0 Votes

  • 35x35
    Jun, 2010
    Bill
    Contact the customer service departments at both the first and second mortgage servicer. Even if the loans are serviced by the same company, you will be dealing with different departments. The time to involve an attorney is when you receive the contracts for a deed in lieu, short sale, or mortgage modification. You will want an attorney experienced in real property to review the documents and discuss your liabilities before you sign them.
    0 Votes

  • 35x35
    Jun, 2010
    Stacia
    This is an excellent article, and I want to thank you for the information. We have been looking into deed in lieu of foreclosure and would like (for various values of "like") to go with that option. We have a mortgage and home equity (2nd mortgage) and I don't know where to start. Do I contact the main lender? Should I contact a lawyer, a real estate agent? I have no idea who to contact to get the ball rolling, and I'd really like to have a knowledgeable advocate in this situation; part of our current problem is we did not have an advocate when we bought this (our first, and probably only) house. Thanks.
    0 Votes

  • 35x35
    May, 2010
    Bill
    Let me put your situation in my words: You live in Maryland and started negotiating a modification on your second mortgage and stopped because you wanted to conclude negotiations on your first. Apparently, you stopped paying your second mortgage during negotiations. Coincidentally with the conclusion of your modification of your first mortgage, the second filed a lawsuit against you. Now you want to know if your can unwind the clock and qualify for any MHA plan. There is a mystery tax form you received. I will assume my version of the facts is correct in my answer. First, review the MHA questionnaire to determine if your second mortgage still qualifies. I am curious why you did not try to qualify for both simultaneously, and it was an error on your part to avoid multi-tasking. Second, if you do not qualify, consult with an attorney in your state regarding how you can respond to the summons. Third and simultaneously, contact the law firm that sent you the summons to learn if you can negotiate an out-of-court settlement. Move quickly and act on my second and third suggestion immediately and simultaneously if you do not qualify. There are times in life when a person needs to multi-task, and this is one of them.
    0 Votes

  • 35x35
    May, 2010
    FA
    I am in montgomery county, MD & I owe 143K on my 2nd mortgage which is also a line of credit. My first mortgage and 2nd mortgage are both from the same lender and my 1st, larger mortgage was recently modified. I had started negotiating modifying the 2nd one but I wanted to get the first one taken care of first. Initially when I would call to check on the account the recording would say that that the account was no long with them and then the lender sent me my tax form indicating that I had a zero balance. However, I just received a correction to the tax form and now they have sue me for the 143K. I don't know if it is too late for me to take advantage of the new Obama plan that a homeowner can have an opportunity to have their home price be reduced to what it is now worth as opposed to what it was origianlly bought. Please help. I have 30 days to respond to the complaint& a day has gone by. They left the summons at my door.
    0 Votes

  • 35x35
    Apr, 2010
    Bill
    If the servicer is in HAFA, it is subject to HAFA's rules. If it is participating in HAFA, it may not require you to sign a promissory note to pay the deficiency balance. According to the HAFA Supplemental Directive 09-09: Home Affordable Foreclosure Alternatives – Short Sale and Deed-in-Lieu of Foreclosure Update (cited above), "with either the HAFA short sale or DIL, the servicer may not require a cash contribution or promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower."
    0 Votes

  • 35x35
    Apr, 2010
    Thomas
    I am in a short sale. My bank is asking me to sign a promissory note to pay for the deficiency. Can it do that?
    1 Votes

  • 35x35
    Apr, 2010
    Bill
    The $3,000 relocation incentive is paid at the close of escrow. These funds are deducted from the gross sale proceeds at closing. Only one payment of $3,000 per household is allowed.
    0 Votes

  • 35x35
    Apr, 2010
    Morgan
    Great article. When does the seller receive the $3,000?
    0 Votes