Home Affordable Foreclosure Alternatives Program (HAFA)


A short sale occurs when a property is sold for less than what the homeowner owes the lender, and the lender agrees to accept less than the mortgage balance owed instead of doing a foreclosure.  If the homeowner voluntarily pays off the difference between the sale proceeds and the mortgage balance owed to the lender, the debt is paid off and there is NO short sale.

Historically, with a short sale, the difference is forgiven by the lender in some cases. In other cases, the homeowner is required to sign a paper and make arrangements with the lender to settle the remainder of the debt over a period of months or years.

It is estimated that a short sale can cost the lender an average of between $50,000 and $100,000 less than a foreclosure.  As a result, many lenders now see a short sale as a viable way to minimize its losses. But until April of 2010, there was no uniform process to do a short sale.  When there is more than one loan on a property, the process becomes inordinately complicated and time-consuming.  

Freddie Mac, Fannie Mae and many major lenders have now developed a consensus about the benefits of HAFA and the program will be rolled out in full force starting August of this year.  Although Freddie Mac's and Fannie Mae's HAFA procedures are not identical, and these two programs also differ from the ones that evolved from the practices of more progressive-thinking major lenders, there are many commonalities. 

All three HAFA programs provide financial incentives to the distressed homeowners, the servicer, and the investor to move the short sale process faster (in 120 days) by approving a short sale before the property is even listed on the MLS.  If a short sale is not successful, under HAFA, a deed-in-lieu of foreclosure (DIL) is used as a Plan B in order to avoid foreclosure on a loan eligible for modification under the HAMP program.

Briefly, the borrower must show financial hardship but does not have to miss payments before they can be eligible for a short sale.  The home must be a primary residence.  The financial incentives include $3,000 for borrower relocation assistance; $1,500 for servicers to cover administrative and processing costs; and up to $2,000 for investors who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a one-for-three matching basis.

The exact amount differs between Freddie Mac's and Fannie Mae's HAFA compared to the non-Government Sponsored Enterprise's HAFA programs. Only licensed realtors trained in HAFA has sufficient knowledge about these differences and can assist you properly.  I am a certified HAFA specialist, having successfully completed the training offered by the California Association of Realtors.  If you are thinking of selling your home, or wondering if you are eligible for HAFA, feel free to send me an e-mail.  Home buyers should not shy away from short sales anymore.  They may find their best bargains through buying short sale properties.