How To Qualify For HAFA Short Sale

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

Posted by

OC Real Estate Solutions                                                            

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

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

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


Re-Blogged 19 times:

Re-Blogged By Re-Blogged At
  1. Doug Anderson 12/15/2010 04:55 PM
  2. Roger D. Mucci 12/15/2010 10:07 PM
  3. Bryant Tutas 12/15/2010 11:53 PM
  4. Gary L. Waters, Broker Owner, Waters Realty of Brevard, LLC 12/16/2010 12:07 AM
  5. Pam Sitterly 12/16/2010 12:16 AM
  6. Scott Gephart 12/16/2010 06:10 AM
  7. Gabrielle Kamahele Rhind 12/16/2010 07:23 AM
  8. Ritu Desai 12/16/2010 08:31 AM
  9. Julie Baldino 12/16/2010 09:39 AM
  10. Dana Voelzke 12/17/2010 02:26 AM
  11. Tni LeBlanc, Realtor®, J.D. 12/17/2010 05:11 AM
  12. Andretta Robinson 12/17/2010 06:16 AM
  13. Linda Graves Arnold 12/17/2010 07:42 AM
  14. Gene Riemenschneider 12/17/2010 11:21 AM
  15. Sharon Alters 12/17/2010 01:22 PM
  16. Debbie Solano 12/18/2010 04:36 AM
  17. Robert Courtney 12/19/2010 03:51 AM
  18. Gabe Sanders 12/20/2010 01:04 AM
  19. Harrison K. Long 01/05/2011 04:17 PM
  20. Jon Quist 01/05/2011 04:25 PM
Home Selling
Orange County Real Estate
government short sale
how to qualify for hafa short sale

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David Ames
Zephyr Real Estate, San Francisco - San Francisco, CA
San Francisco

I feel like I just took a "mini-course" in HAFA and HAMP...thank you Dave!  Very well written and easy to digest.  Bravo.  I've only represented buyers in a couple of short sale transactions...never a seller.  Most of the short sales are confined (interestingly enough) to the southern districts of the City which I rarely have clients for.  You never know when the situation will arrise, though!

Dec 17, 2010 06:16 AM #33
The Hollinden Team
RE/MAX Champions - Louisville, KY
Serving the Greater Louisville area

Dave, great job of condensing this information.  I can tell you from experience that a HAFA short sale is much easier to work for buyer and seller.  I just wish that it was more common.

Dec 17, 2010 09:17 AM #34
Mary Kay Irving
Thompson Daviau Realty - Boulder, CO

Great article Dave.  We just had a class on this provided by BOA and hearing some of this info over and over, like anything with real estate, aides the way to understanding.  Here's hoping we'll be able to actually help many more distressed homeowners!

Dec 17, 2010 09:31 AM #35
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Excellent post and worthy of a reblog.  Very good information. 

Dec 17, 2010 11:19 AM #36
John Novak
Keller Williams Realty The Marketplace - Las Vegas, NV
Henderson, Las Vegas and Summerlin Real Estate

Very well written, Dave. You've made this easy to understand for homeowners who may be under a lot of stress from being upside down on their mortgages.

Dec 17, 2010 12:37 PM #37
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

Dave, this is an excellent summary. We are in a military town, so HAFA is definitely a type of short sale that we list and also come across when representing buyers.

Dec 17, 2010 01:18 PM #38
Marcy Moyer
eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales - Mountain View, CA
Probate, Trust, and Investment Specialist


This was an excellent summary of the process. I would love to see some stats soon on how many are successful.


Dec 17, 2010 01:29 PM #39
Lottie Kendall
Pacific Union International - San Francisco, CA
Serving San Francisco and the Silicon Valley

This is a great, easy to understand explanation of HAFA and HAMP. I've bookmarked it.

Dec 18, 2010 12:49 PM #40
Robert Courtney
Lihue, HI
Century 21 All Islands, RA, CDPE, MCRE, CIAS

Dave - Using this blog in my evidence book to make sure I stay on track with the process.  It is one thing to read the ACT and another to apply for it if it is not used often.  

Dec 19, 2010 03:45 AM #41
Ric Mills
Keller Williams Southern Az - Tucson, AZ
Integrity, Honesty, and Vast Real Estate Knowledge

Good post, there is one kicker that can kill a lot of modifications.  The Bank can opt out if the home value has fallen more that 5% than the loan payoff balance.   This is "like 99%" all of these loans.  The Bank can still do it but they are not required to do it.  This is the whole problem with the program for modifing loans.  It doesn't reach out to most of the people that need it and forces the Short Sale or Foreclosure. 

Dec 19, 2010 04:39 AM #42
Ric Mills
Keller Williams Southern Az - Tucson, AZ
Integrity, Honesty, and Vast Real Estate Knowledge

The HAFA classes are great information, but you need to look closely at the materials for each Bank.  They all have certain information that you need to forward to them to get the process going.  Also, if the client is thinking of a modification, have them fill out the forms directly with the Bank and advise them to use an attorney and an accountant to complete the process. 

Dec 19, 2010 04:48 AM #43
Winter Baserva
Seasons Realty Group of Solid Source Realty, Inc. - Atlanta, GA
Realtor -Homes For Sale, Atlanta, GA

Its been my experience that many lenders do not understand the HAFA program. One important note, if there are TWO mortgages, most likely the HAFA will not be allowed due to the second mortgage rejecting it.

Dec 20, 2010 12:56 AM #44
Dave Gubler
Mission Viejo, Foothill Ranch, Lake Forest, Ladera Ranch - Lake Forest, CA
Realtor | Orange County

David - Thanks!  I wanted to keep it clean and simple.  Hopefully it provides enough info to be useful but not so much that it "bogs" down.

Steve - I find all short sales to be quite unique regardless of whether they are HAFA or non-HAFA.  Some of our HAFA's have been "interesting" to say the least with several ultimately not resolving through HAFA program and done outside of the program altogether.

Mary Kay - Thank you. You can never know enough.  Great to get the information from various sources too.

Gene, John, Frank, Marcy, Lottie and Bob - Great! I am happy you found it useful.

Ric - Yes, that is for sure.  Each bank implements it in their own way that often changes surreptitiously during the process.

Dec 23, 2010 04:30 AM #45
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Dave, excellent post, excellent explanation of NAMP/HAFA. I was dealing only with investors so far, but I read it with great interest

Jan 04, 2011 03:14 PM #46
Dave Gubler
Mission Viejo, Foothill Ranch, Lake Forest, Ladera Ranch - Lake Forest, CA
Realtor | Orange County

Jon - Thank you for the feedback.  I hope it helps.

Jan 05, 2011 03:13 PM #47
Harrison K. Long
HomeSmart, Evergreen Realty - Irvine, CA
REALTOR , GRI, Broker associate, Attorney

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. 

Jan 05, 2011 04:13 PM #48
Dave Gubler
Mission Viejo, Foothill Ranch, Lake Forest, Ladera Ranch - Lake Forest, CA
Realtor | Orange County

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

Jan 06, 2011 01:57 AM #49
David Popoff
DMK Real Estate - Darien, CT
Realtor®,SRS, Green ~ Fairfield County, Ct

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

Jan 10, 2011 05:00 AM #50
Dave Gubler
Mission Viejo, Foothill Ranch, Lake Forest, Ladera Ranch - Lake Forest, CA
Realtor | Orange County

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

Feb 11, 2011 08:21 AM #51
Matt Robinson
Professional Investors Guild - Pensacola, FL

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. 

Aug 11, 2011 05:27 AM #52
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