The Home Affordable Foreclosure Alternatives Program, known as HAFA, is designed to help borrowers who are unable to retain their home under the Home Affordable Modification Program (HAMP) or other loan modification programs. While the first priority is to keep families in their homes, where this is not possible with a loan modification, they may be able to avoid foreclosure by completing a short sale or a deed-in-lieu of foreclosure (DIL) under HAFA.
The HAFA guidelines for short sales are adjusting as of February 1st 2015. The first major change that will benefit homeowners are that may not be eligible up to $10,000 in relocation incentive if they qualify for HAFA. Various factors determine a borrowers eligibility for HAFA such as if the property is occupied, the original loan balance and origination date, and if the investor participates in HAFA. It’s also important for a borrower to know that If a tenant is occupying the property they may be eligible for the relocation incentive.
The 2nd guideline is that they are not allowing up to $12,000 to subordinate mortgage lien holders. This coupled with a boosted relocation incentive will reduce the NET proceeds going to the 1st mortgage. This will likely mean buyers will have to come in with higher offers or you will see a reduction in relocation incentive to boost the proceeds to the 1st mortgage on particular transactions. With these new guidelines transactions may have to be structured differently in order to satisfy all parties.