In April, the Obama administration announced a new program, called Home Affordable Foreclosure Alternatives (HAFA), designed to create more short sales, where banks allow homeowners to sell their homes for less than the owed mortgage.
Like other foreclosure-prevention initiatives, this one appears to be off to a slow start.
HAFA was designed as a cousin to the Home Affordable Modification Program, HAMP, and we all know how those are working out.
HAFA works like this:
- Servicers are supposed to consider short sales for borrowers who aren’t able to receive a HAMP modification. There are approximately 700,000 HAMP applicants that have been ejected from that program, leaving a potentially large pool of borrowers who might be evaluated for HAFA.
- Streamlining the short sale process through standardized documents and approaches.Offer incentive payments to mortgage-servicers, investors and the borrowers that accept a short sale under prescribed guidelines.
Many real-estate agents say banks have largely ignored the program and that they are applying it unevenly. Banks are initiating the HAFA transaction and then after three weeks they say, sorry, you don’t qualify. Wasting three weeks, which is only the start.
Of course….. the Industry officials say that HAFA is hindered by extensive documentation requirements and restrictive qualification guidelines. A homeowner that’s already relocated isn’t HAFA eligible, for example, and neither are borrowers that apply within 60 days of a foreclosure date.
The program is also voluntary, limiting participation from second-lien holders and mortgage insurance companies that see a financial reason to avoid a short sale that requires them to forgo the opportunity to seek deficiencies against borrowers.
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