Another Government Acronym
When this program was first announced last May it was referred to as the Foreclosure Alternatives Program (FAP), an easy name to understand and a concept that we have all been anxiously awaiting. When the details were finally released last week it was no surprise that the program was 7 months late, provides no real incentives for banks to participate and has absolutely no “teeth”. What is surprising is that the government has chosen to make this program part of its already questionable Home Affordable Modification Program (HAMP) and they have created a totally new acronym that is equally as surprising – HAFA, or the Home Affordable Foreclosure Alternatives Program. Is it me or is this a really sad oxymoron? Hello! Making Homes Affordable is about keeping your home and Foreclosure Alternatives is about losing your home (but avoiding foreclosure). Is the administration so stubborn that they cannot come up with a new program for people that clearly cannot afford their home anymore? Shouldn’t banks be able to determine whether or not a borrower should get a loan modification or a short sale? See my post: “Are Loan Modifications Working?”
I will share some basic details on the HAFA guidelines but honestly, even if banks decide to participate in the program, they likely won’t follow the guidelines anyway. We specialize in short sales and we frequently work with FHA borrowers that qualify for the 15 year old HUD Pre-Foreclosure Sale (PFS) program. If HUD actually enforced their guidelines and the banks actually followed them, we wouldn’t get any PFS deals done, and the fact is that we are successfully helping homeowners with their PFS transactions. So, the bottom line is that we now have another government program that will be loosely enforced and may just create more aggravation than it is worth. If you are facing foreclosure and don’t know what to do, your best bet is to contact a real estate professional, and even better, a Certified Distressed Property Expert®, for expert advice on how to avoid foreclosure. The banks don’t want to foreclose any more than you do, but if you want to successfully avoid foreclosure, you’ll need the help of a real estate professional who understands the banks and their ever changing policies and procedures. Note: Your friend, neighbor, relative, etc. that has their real estate license does not necessarily qualify to help you.
The HAFA Guidelines (In Theory)
PLEASE NOTE: These guidelines DO NOT apply to all homeowners and to my knowledge, no banks have adopted these guidelines yet. Furthermore, Fannie Mae and Freddie Mac have yet to release their final guidelines (which represent the majority of loans) so if these guidelines do not apply to you, it does not mean you are not eligible for a loan modification, short sale or deed in lieu of foreclosure. So, with hesitation, here are the basic requirements for HAFA, which are the same requirements for HAMP:
- The property is the borrower’s principal residence
- The mortgage loan is a first lien mortgage originated on or before January 1, 2009
- The mortgage is delinquent or default is reasonably foreseeable
- The current unpaid principal balance is equal to or less than $729,750
- The borrower’s total monthly mortgage payment exceeds 31 percent of the borrower’s gross income
Bottom Line on Avoiding Foreclosure
Bottom line, if you are facing foreclosure and you want to know your options, please contact us or any other real estate professional who specializes in distressed property.