The HAFA short sale program, effective from April 5, 2010, through December 31, 2012, has been touted as the answer to every short sale agent's nightmare. HAFA promises short sale approval within 10 days and gives the seller up to $3,000 in cash at closing. But because HAFA is a government-sponsored program, it's a lot more complicated than that.
HAFA is an acronym for Home Affordable Foreclosure Alternatives, and it's part of President Obama's Making Home Affordable Program. The first step is for a borrower to apply to HAMP, Home Affordable Modification Program. Here are the rules to be eligible for the HAMP program:
- Only personal residences are eligible.
- The mortgage amount must be less than $729,750.
- The borrower suffers a hardship such as loss of income, an increased mortgage payment or an unexpected increase of expenses.
- The mortgage originated before January 1, 2009.
- The PITI mortgage payment, including HOA, is more than 31% of the borrower's gross monthly income.
If any one of the 5 rules do not apply, then the borrower is not eligible for HAMP. I know this because I went to the Home Affordable Modification page to answer each of the 5 questions. I did this 5 times, and changed a different answer to no each time. A no answer to any one of the 5 resulted in a rejection.
If you are not eligible for HAMP, then you may need to find a short sale agent to help you. If you are eligible for HAMP, it does not mean that you will qualify for HAMP. Eligibility and qualification for HAMP are two different animals. Your goal, if you want to do a short sale, is to hope that HAMP will turn you down. Then you will be eligible for HAFA. Or, if accepted into HAMP, and you stop making your loan modification payments, you can apply to HAFA. This may sound like goofy rules, but it's the way our government works.
I think it's interesting to point out that very few borrowers tend to qualify for a loan modification. In fact, almost every single short sale that I do in Sacramento is for a seller who was rejected for a loan modification.
Determine if Your Lender Participates in the HAMP Program
It's important to know if your lender participates in HAMP, because lenders that participate in HAMP also participate in HAFA. All Fannie Mae and Freddie Mac lenders are required to participate.
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