The Home Affordable Foreclosure Alternative Program

By: Jennifer M. Monty, Associate and Matthew G. Burg, Associate

On April 5, 2010, the Home Affordable Foreclosure Alternative (“HAFA”) will go into effect. This new program is the Obama administration’s latest attempt to help homeowners avoid foreclosure.

HAFA is a new program that will allow borrowers to sell their home for less than the mortgage balance, commonly known as a short sale. Borrowers will receive preapproved short sale terms from their lender prior to putting the home on the market. Eligibility is limited to loans which:

– Are on a person’s primary residence

– Are originated before January 1, 2009

– Are delinquent or in imminent danger of default

– Do not exceed $729,750

– Create homeowner hardship

– The Borrower’s total monthly housing payment exceeds 31 percent of gross income

– Are serviced by Fannie Mae, Freddie Mac, or servicers who have voluntarily signed on to the HAMP program

HAFA comes as a response to the Home Affordable Modification Program (“HAMP”). According to government statistics published in January 2010, of the 3 million plus eligible loans, lenders/servicers have offered, started, or placed loans into trial or permanent modifications to 28% of eligible borrowers. HAFA is one response to the remaining borrowers who have not received a modification. Under the new program, when a borrower does not qualify under HAMP, the lender /servicer must offer a short sale in writing to the borrower within 30 days, and the borrower must respond within 14 days. There are monetary incentives for lenders/servicers who participate in the program. The program is set to expire December 31, 2012.

Critics of the program are concerned with the potential for fraud. To combat such fraud, lenders will require the borrowers, realtors, and buyers to sign affidavits that the sale is an arm’s length transaction. Other concerns include investors making low offers to lenders, buying the property and then selling the property on the open market at a higher rate. To avoid this scheme, lenders can require that offers only come from licensed real estate agents.

HAFA brings more change to the growing loss mitigation industry. Lenders and servicers must keep abreast of the various programs, as well as prepare for the upcoming changes. Weltman, Weinberg & Reis Co., L.P.A. will continue to monitor this situation and provide updates with respect to loss mitigation issues.

If you have any questions on this information, please contact Jennifer M. Monty, Esq. or Matthew G. Burg, Esq. Jennifer and Matt are both Associates in the Litigation & Defense department in the Cleveland office of Weltman, Weinberg & Reis Co., L.P.A. Jennifer can be reached at (216) 685-1136 or via e-mail at and Matt can be reached at (216) 685-1111 or


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