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Hardships & Expanded HAFA Eligibility

When a homeowner is seeking to sell their home for less than what they owe on the property–a short sale–they usually have to submit a “hardship letter” explaining the reason they need to sell the home for the lower amount. This letter is an important part of the short sale package, as lenders consider the borrower’s specific situation when deciding whether or not to approve the sale.

Servicers and investors are under no obligation to approve a short sale, and they may decide not to allow the sale just because a homeowner has decided to move into a smaller house or the just because the property is no longer worth what the owner paid for it. Lenders do not like to collect less money than they are entitled, and therefore they will not approve a short sale unless they deem it in their own financial interest to do so. Hence, in order for a short sale to be approved, one usually needs a legitimate hardship.

A hardship is the reason why you find yourself unable to pay your mortgage. It is often based on financial  difficulties, such as reduced income or excessive debt. However, other difficult circumstances may qualify as a hardship (e.g., illness or medical emergency, death in the family, divorce …etc.). Many different circumstances  might apply; however, homeowners should ensure that they explain their situation in such a way as to make a short sale seem like the best option for the lender. Residents in our area are well served by receiving tailored advice from a Burlington County short sale lawyer on how to navigate the process based on their exact situation.

For example, the professional may explain that special government programs apply which offer even more incentives–for both the borrower and lender–to engage in a short sale. In fact, rule changes this month to the Home Affordable Foreclosure Alternatives (HAFA) program ease requirements so that more homeowners can participate.

Less Stringent HAFA Qualification

Millions of homeowners are living in underwater homes–where they owe more than the home is worth. Many in this situation think they have few options. However, if the homeowner qualifies for HAFA, they may be able to entice their lender to approve a short sale, allowing them to get out of the situation and receive a fresh start.

HAFA provides up to $3000 to the borrower to cover relocation costs and servicers can get up to $1500 for processing and administrative costs. The New HAFA guidelines, which became effective on June 1st enact strict standards to qualify for the program. Under the new rules, homeowners are no longer required to occupy the property or to be late in their payment in order to be eligible.

These new guidelines will allow many borrowers who were previously ineligible, mainly on the basis of not having an accepted hardship, to qualify for the program. If you are in New Jersey, please get in touch with our  Moorestown real estate attorney to learn if you now qualify to take advantage of the program.