The HAFA provisions (prior to the updates) were
- Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
- Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
- Provides the following financial incentives:
- $3,000 for borrower relocation assistance;
- $1,500 for servicers to cover administrative and processing costs;
- 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.
- Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.
After the updates, HAFA has been modified so that:
- Those seeking a short sale must get an answer within 30 days
- Servicers are no longer required to verify a borrowers financial information
- Servicers are no longer required to determine if the Debt-to-Income (DTI) exceeds 31%
- Second lien holders no longer must accept 6% of the unpaid balance
Home Affordable Foreclosure Alternatives Program - Policy Update
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