How To Qualify For HAFA Short Sale

By
Real Estate Broker Owner with Mission Viejo, Foothill Ranch, Lake Forest, Ladera Ranch BRE# 01274644

How To Qualify For HAFA Short Sale
First let's start by defining exactly what HAFA is:

The government's Home Affordable Foreclosure Alternatives program, or HAFA as it is commonly known may provide you with some relief.  There are some hoops to jump through but working with an agent that understands the details and the process will ensure that you have an optimal chance for success.  (There are 43 pages of guidelines associated with this program so please choose your real estate agent wisely!)  Click Here For: HAFA Information Center

The Three Main Benefits to you, the homeowner, are:

(1. A formal timeframe to market and sell your home during which a foreclosure sale cannot occur. This, in my mind, is the main benefit.  It will take much of the uncertainty and fear of foreclosure away from homeowners that are financially distressed and make it very probable that they are able to remain in their home longer than they otherwise would be able to.

2. A monetary incentive to assist you with relocation expenses.  Although this is small, originally set at $1,500.00, it will help with the cost of relocating. It is presently set at $3.000.00.

3. Releases you from any future liability on the debt. This benefit has the most long-term benefit.  It eliminates the lender/servicers ability to secure a deficiency judgment or promissary note on the loss.

HAFA is an alternative to the Home Affordable Modification Program (otherwise known as HAMP).  To be eligible for HAFA the following criteria must initially be met:

1. Your lender/servicer must be participating in HAMP & HAFA:  This can easily be established.  You can look up whether your lender/servicer is participating in the government programs by following this link: Lenders Participating In HAFA

2. You must be HAMP eligible: What does this mean?  It is fairly simple.  All of the following must be true: 
A) The home must be your primary residence. 
B) Your mortgage must have been originated prior to January 1, 2009. 
C) Amount owed on your 1st mortgage must be equal to or less than $729,750 (For a one-unit property).
D) Your current monthly mortgage payment exceeds 31% if your gross income.

AND ONE OF THE FOLLOWING MUST APPLY TO YOU:  (Your lender/servicer is required to consider you for HAFA if the two stipulations above and one of the stipulations below are met)

1. You do not qualify for a trial period plan:   This is a bit trickier.  Participating lenders/servicers have to analyze your further eligibility.  The goal of HAMP is to provide a borrower with a loan payment (Principal, Interest, Taxes, Insurance, and HOA) of 31% of their gross income. This is the part that everyone knows about and it sounds pretty good (for most people)!  Unfortunately the lender has an out.  The bank is required to perform a Net Present Value Test (NPV Test) on each potential HAMP candidate.  The long and the short of the NPV Test is this:  If the bank will make more money by foreclosing than they will by modifying your loan (payment to 31% of gross income) then the bank is not required to offer you the loan modification.  This is where many potential loan modifications via HAMP are stopped.  Quite simply the modifications the bank would have to make (rate reduction, term extension, and principal forbearance) would make it more cost effective to foreclose.  Please feel free to contact me regarding how the NPV Test is performed and what the components of it are.

2. You do not successfully complete a Trial Period Plan: This is fairly straight-forward.  If you are offered a HAMP Trial Period Plan and reject it;  you do not provide the correct & complete documentation required to participate in the plan offered; you do not make all payments during the course of the Trial Period Plan.

3. You miss at least two consecutive payments during a HAMP modification:  Many people are unclear regarding this item.  If you have completed the Trial Period Plan and entered in to the final loan modification stage of HAMP but you miss two consecutive payments on the modified loan then you are HAFA eligible.

4. You request a Short Sale:  You have determined that you must move and you meet the first two criteria mentioned (Lender is participating in HAMP/HAFA, and you are HAMP eligible).

Although the HAFA process can be complex it may provide benefits to you that were not available previously.  To participate in HAFA you must utilize a licensed real estate agent.  For your own benefit make sure that you select an experienced short sale agent/negotiator.  Please contact me directly at (949)218-0952 if you need to consider a short sale.

Recent HAFA Updates (Effective February 1st, 2011): The program has been revised in order to expedite processing of a short sale.  A. Participating lenders are no longer required to verify the sellers financial information (though they still have the option to do so). B. 2nd lien/mortgage caps have been removed providing more room to negotiate.  C. The home may be rented out for the previous 12 months prior to short sale agreement so long as it was the principal's primary residence prior to renting out.  D. Participating lenders must respond to a short sale request under the program within 30 days.

HAFA Information Center   All About Short Sales   Loan Mod Facts   Foreclosure Timeline

Related Posts:
Foreclosure Timeline In California
HAFA Short Sale Agreement - Fact or Fiction?
Deficiency Judgments: Short Sale vs. Foreclosure
Reasons Short Sales Are Rejected
The Truth About Loan Modifications

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OC Real Estate Solutions                                                            

by DAVE GUBLER| IML REAL ESTATE |  broker license #: 01274644

direct: 949 292 2763   |   office: 949 273 8923 
web: imlrealestate.com | blog: oc real estate solutions

Successes! 40 Homes Sold In The Last 12 Months: SOLD GALLERY

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Re-Bloggged 19 times:

Re-Blogged By Re-Blogged At
  1. Doug Anderson 12/16/2010 12:55 AM
  2. Roger D. Mucci 12/16/2010 06:07 AM
  3. Bryant Tutas 12/16/2010 07:53 AM
  4. Gary L. Waters, Broker Owner Waters Realty of Brevard, LLC 12/16/2010 08:07 AM
  5. Pam Sitterly 12/16/2010 08:16 AM
  6. Scott Gephart 12/16/2010 02:10 PM
  7. Gabrielle Kamahele Rhind 12/16/2010 03:23 PM
  8. Ritu Desai 12/16/2010 04:31 PM
  9. Julie Baldino 12/16/2010 05:39 PM
  10. Tni LeBlanc 12/17/2010 01:11 PM
  11. Andretta Pierce 12/17/2010 02:16 PM
  12. Jim & Linda Arnold 12/17/2010 03:42 PM
  13. Gene Riemenschneider 12/17/2010 07:21 PM
  14. Sharon Alters 12/17/2010 09:22 PM
  15. Debbie Solano 12/18/2010 12:36 PM
  16. Robert Courtney 12/19/2010 11:51 AM
  17. Gabe Sanders 12/20/2010 09:04 AM
  18. Harrison K. Long 01/06/2011 12:17 AM
  19. Jon Quist 01/06/2011 12:25 AM
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Topic:
Home Selling
Groups:
ORANGE COUNTY, CA REAL ESTATE
Orange County Real Estate
Tags:
how to qualify for hafa short sale
government short sale

Comments 52 New Comment

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Rainmaker
461,064
Harrison K. Long
business, REALTOR , GRI, Broker
Coldwell Banker Previews, Irvine, South OC

Dave ... I prepared a draft of my own article on what a HAFA short sale is all about.  Then I saw your good post here on the same subject.  Thanks for the important information, and I will reblog your post.  Best wishes for 2011. 

January 06, 2011 12:13 AM
Rainmaker
185,755
Dave Gubler
Realtor | Orange County
Mission Viejo, Foothill Ranch, Lake Forest, Ladera Ranch

Harrison - Thank you for the re-blog.  I hope my post is concise enough not to overwhelm but detailed enough to be useful.

January 06, 2011 09:57 AM
Rainmaker
565,776
David Popoff
Realtor & Property Manager, Fairfield County, Ct.
DMK Real Estate & Property Mgmt

Dave, very detailed AR post on HAFA shortsales, thanks for the post. Also congrats on getting to 100,000 on AR, you are at 99,996 pts but hopefully with this comment it shoots you over ~ Best DAve

January 10, 2011 01:00 PM
Rainmaker
185,755
Dave Gubler
Realtor | Orange County
Mission Viejo, Foothill Ranch, Lake Forest, Ladera Ranch

David - Thank you for taking the time to comment.... and get me over the 100,000 mark.

February 11, 2011 04:21 PM
Rainmaker
124,583
Matt Robinson
Pensacola Real Estate (850) 292-4000
ERA Emerald Coast Realty

Please warn your clients to read the fine print when it comes to HAFA, because it's oftentimes not all peaches and creme.  Most lender are using it as nothing more than a funnel for deed in lieu to save them the money to foreclose.  If you get a bad valuation at the start, you are doomed, whereas with other short sales you can typically get a new appraisal/bpo in 2-4 months if they 1st guy didn't fully understand the market conditions and/or diseconomies of the home. 

August 11, 2011 12:27 PM
Anonymous
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Rainmaker
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Dave Gubler

Realtor | Orange County
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