Many homeowners may feel that they can no longer afford their home, but want to avoid the negative effects of foreclosure. The Home Affordable Foreclosure Alternatives (HAFA) Program offers homeowners, their mortgage servicers, and investors an incentive for completing a short sale or deed-in-lieu of foreclosure. With these options, under HAFA, a homeowner leaves their home to transition to more affordable housing and alleviate the mortgage debt they owe.
These options are available for homeowners who: 1. do not qualify for a trial mortgage modification under the Making Home Affordable Program; 2. do not successfully complete the trial period for their modification; 3. miss at least two consecutive payments during their modification period; or 4. request a short sale or deed-in-lieu of foreclosure.
In a short sale, the servicer allows the homeowner to list and sell the mortgaged property with the understanding that the net proceeds from the sale may be less than the total amount due on the first mortgage.
Deed-in-Lieu of Foreclosure
Generally, if the borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a deed-in-lieu of foreclosure. With a deed-in-lieu, the borrower voluntarily transfers ownership of the property to the servicer— provided the title is free and clear of mortgages, liens, and encumbrances.
The HAFA Program streamlines both of these options to make them easier for a homeowner to work with their servicer. Under the program, a homeowner can receive $3,000 to help with relocation costs.
Mortgage servicers and investors write their own guidelines under the Federal requirements to determine how to implement the program. For more information about your options, you should contact your mortgage servicer. If you have questions about the program, or want guidance about how these options may impact your personal situation, you may wish to speak to a HUD-approved housing counselor for free.
Making Home Affordable and Other Options to Remain in Your Home
Mortgage servicers who participate in the Making Home Affordable Program are required to evaluate homeowners for a Home Affordable Modification before evaluating them for other options. If you request a modification from your mortgage servicer, and are determined to be eligible, you will enter into a trial period plan.
If it is determined that you are not eligible for a Home Affordable Modification, your mortgage servicer will evaluate you for other alternatives they offer to keep you in your home, such as their own modification programs or a forbearance.
A HUD-approved housing counselor can work with you for free to help you understand your options.