Effective Februray 1, 2011 updates to the Home Affordable Foreclosure Alternatives (HAFA) Program will take affect.  These guidelines may help increase the number of approvals for homeowners seeking assistance under this program.

Here are the key changes:

  1. Monthly Gross Income Requirements– Servicers are no longer required to verify any financial information to determine if the borrower’s total monthly mortgage payment exceeds 31% of the borrower’s monthly gross income.  This being said, the servicer is still required to verify the borrower’s hardship and may request financial documents to evaluate the hardship.
  2. Vacant Property Requirements – Properties can now be vacant or rented up to 12 months prior to the Short Sale Agreement as long as the borrower can prove that the residence was their primary residence and they have not bought another home in that time.  Relocation no longer is limited to work related relocation and the relocation distance requirement has been removed.
  3. Release of Subordinate Liens (Paying Off Second/Junior Liens) –  the 6% cap to pay off junior liens has been eliminated.  The servicer determines the percentage going to each junior, but the $6,000 cap is still in place.
  4. Timing For Issuance of Short Sale Agreement – now for both HAFA short sales initiated by the servicer  and those requested by the borrower, the time line for the servicer to respond to the borrower is 30 calendar days. (Please note that many servicers are not adhering to this guideline simply because of the volume of HAFA requests.  There does not appear to be any penalty to the servicer for not meeting this timeline.)
  5. Timing For Response To Alternative Request For Approval of Short Sale – if the borrower submits an executed sales contract, Alternative RASS and signed Hardship Affidavit or RMA, the servicer must communicate approval or disapproval, or a counter within 30 calendar days. 
  6. Real Estate Commissions – the 6% cap remains, but servicers must now include a statement in the Short Sale Agreement that they will not deduct 3rd party vendor fees from any agent commission.
  7. Alternative Deed-In-Lieu (Deed for Lease) Programs – these programs did not previously qualify for the borrower to receive relocation incentives.  They now are included but only when the DIL is final.
  8. Borrower Notices – Servicers can now consider a borrower for HAFA while the borrower is considering HAMP.

Servicers are not required to, but may re-evaluate borrowers who were previously ineligble before the guideline were changed. 

For more information contact me for the full Supplemental Directive 10-18.