The Fannie Mae Home Affordable Foreclosure Alternatives Program (HAFA) is designed to reach those borrowers – both those who are in default and those who are at imminent risk of default – who are eligible for but unsuccessful under the Home Affordable Modification Program (HAMP).
Fannie Mae HAFA streamlines and standardizes industry practices for short sales and deeds-in-lieu to provide eligible borrowers with an alternative to foreclosure. With a short sale, the borrower, with the servicer’s permission, lists and sells the property even if the sale may be less than the total amount due on the mortgage loan. The mortgage lien holder determines in advance the minimum acceptable net proceeds it will accept as a short payoff in full satisfaction of the total amount due on the first mortgage loan.
With a deed-in-lieu (DIL), the borrower voluntarily transfers ownership of the property to the lien holder or its designee in full satisfaction of the total amount due on the mortgage loan.
Borrowers who are eligible for DIL and who indicate interest in remaining in the property as a tenant must be considered for the Deed-for-Lease™ Program (D4L). For more information, refer to Announcement 09-33 and the following Web site: https://www.efanniemae.com/sf/servicing/d4l/
The Fannie Mae version of HAFA went into effect August 1, 2010 and expires December 31, 2010.
Fannie Mae HAFA Eligibility
A borrower is eligible for HAFA if all the following requirements have been met in the listed order:
1.The borrower has qualified for a HAMP modification*, based on verified income, but was not offered a trial modification due to inability to meet HAMP qualifications (for example, did not pass the NPV test or meet the target monthly mortgage payment ratio); OR failed to complete the trial period successfully; OR became 2 consecutive payments (31 or more days) delinquent on the modified loan; OR requests a short sale or DIL
* One exception to the HAMP eligibility criteria regarding property occupancy allows a borrower to be eligible for HAFA if evidence is provided that he/she (i) had to relocate to a new job or was transferred by an existing employer more than 100 miles from the property AND (ii) has not purchased a one- to four-unit property within 90 days prior to the date of a HAFA Agreement.
2. The borrower has been considered for all other home retention options as per Fannie Mae’s loan workout hierarchy
3. The loan servicer has completed an evaluation of the borrower’s financial condition and have determined that the borrower does not have an ability to contribute meaningfully to reducing the potential loss on the mortgage loan.
Without Fannie Mae’s prior consent, a borrower is not eligible for HAFA if:
1. A foreclosure sale is scheduled or could be initiated and reasonably expected to be held within 60 days of either the borrower’s request for a HAFA or a determination of a borrower being ineligible for HAMP
2. The mortgage loan is secured by a property in Florida on which foreclosure proceedings are pending, judgment has been obtained, or a hearing on summary judgment or trial is scheduled within 60 days
3. A borrower in an active Chapter 7 or 13 bankruptcy case may be considered for HAFA if the borrower, borrower’s counsel, or bankruptcy trustee requests HAFA consideration.
Fannie Mae HAFA Program Summary – Features and Benefits
The HAFA program simplifies and streamlines the use of short or "pre-foreclosure" sale and deed-in-lieu of foreclosure (DIL) options by incorporating the following unique features:
- Complements HAMP by providing alternatives for borrowers who are HAMP eligible (including borrowers facing imminent default);
- Utilizes verified borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis;
- Allows the borrower to receive pre-approved short sale terms prior to the property listing;
- Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement;
- Releases the successful HAFA borrower from future liability for the debt; the lender can’t ask for a deficiency judgment against the borrow
- Uses standard processes, documents, and timeframes;
- Provides financial incentives to borrowers, servicers and subordinate lien holders.
- The servicer must respond to an offer within 10 business days.
- The servicer must allow at least 45 days to close the sale after approval, with a maximum of 60 days
- A foreclosure must be postponed during the sale period, which is at least 120 days.
Incentive Compensation
Servicer Incentives
- $2,200 upon verification of a successful Fannie Mae HAFA short sale
- $1,500 following the successful completion of a Fannie Mae HAFA DIL
Borrower Incentives
The borrower is entitled to $3,000 to assist with relocation expenses following successful completion of a HAFA short sale or a DIL. This amount may be deducted from the net sales proceeds at closing of the sale. You may not require the borrower to apply this incentive to obtain the release of junior liens or non-real estate title impediments.
In most circumstances, the borrower will receive funds at closing of a short sale or within 5 days after the servicer's acceptance of a DIL, provided the borrower has vacated the property and left it in acceptable condition.
No servicer or borrower incentive will be paid for short sales on Fannie Mae second lien mortgage loans.
Subordinate Lien Holder Incentives
Six percent of the outstanding unpaid principal balance of each subordinate lien in order of lien priority, with an aggregate total of $6,000 to all lien holders, will be offered in exchange for releasing their liens and satisfying the underlying debts.
Downsides to Fannie Mae HAFA Program
