HAFA Rules – How Can They Help?
Home Affordable Foreclosure Alternatives (HAFA) is a federal program designed for those who can’t afford to make their mortgage payments and need to transition to more affordable housing. HAFA provides two alternatives for getting out of your mortgage before your property is foreclosed: a short sale or Deed-in-Lieu (DIL) of foreclosure. A short sale is when the mortgage company lets you sell your house for an amount less than what is still owed on it. In a DIL, the mortgage company lets you give the title back, thereby transferring ownership back to them.
Many short sales have taken months to complete. Sometimes, the process even fails resulting in foreclosure. But, under HAFA, rules are created to streamline the process and require owners and lenders to work together in a timely fashion to avoid foreclosure. The rules, intended to speed up the short sale process, are in effect from April 2010 to December 31, 2012. In New Jersey, if you think you may qualify for HAFA assistance, contact one of our Burlington County short sale lawyers to expedite this process before time runs out at the end of the year.
The HAFA guidelines apply to lenders who voluntarily participate in the Home Affordable Modification Program (HAMP), which includes over 100 participating servicers. The Department of Housing and Urban Development says that the lenders who participate in this program cover over 89% of outstanding mortgages in the country. This means that before you take advantage of the HAFA guidelines you must apply for a mortgage modification with your lender. If you are denied or fail to make the necessary timely payments then you could qualify under HAFA.
Here are some of the criteria that you must meet in order for you to be eligible for HAFA (these criteria – You have a documented hardship.
– You have not purchased a new house within the last 12 months.
– Your first mortgage is less than $729,750.
– You obtained your mortgage on or before January 1, 2009.
– You have not been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.
– Borrower is delinquent or default is foreseeable.
– Borrower’s total monthly payment exceeds 31% of gross income.
– This is your principal residence.
According to HAFA, lenders must now offer a short sale agreement in writing to the borrower within 30 days if the borrower does not qualify for or complete a loan modification. Borrowers then have 14 days to respond to the lender’s short sale offer.
There are significant benefits if you qualify under HAFA. Unlike conventional short sales, a HAFA short sale completely releases you from your mortgage debt after selling the property. This means you will no longer be responsible for any deficiency between the price paid for the property and the amount owed.
The servicer will waive the deficiency. Also, in a HAFA short sale, your mortgage company works with you to determine an acceptable sale price. HAFA has a less negative effect on your credit score than foreclosure or even conventional short sales. The sooner you seek help, the more options you may have if this is the first time you have been in deep water.
Contact one of our Moorestown short sale attorneys if you want guidance in these matters.