HAFA, the Home Affordable Foreclosure Alternatives program, is meant to help borrowers who are not able to keep their home with a HAMP (Home Affordable Modification Program) or other modification. Mortgage loan modifications are a great option for borrowers who have the income to afford their home with a reduced payment.
But some homeowners don't make enough money to qualify for a loan modification. For them, it's a choice of either being forced into foreclosure or finding an alternative.
And there are good reasons to seek an alternative to foreclosure. In foreclosure your home is taken because you defaulted on your mortgage loan. It's something you're forced into when your efforts to keep your home have failed, and it has a negative effect on your credit rating. If losing your home isn't bad enough, the bank can also sue you for the difference between what you owed on the property and the amount it sells for.
The two most common alternatives to foreclosure are a short sale and a deed in lieu of foreclosure. A short sale is when the bank allows the home to be sold at its market value even though it won't be enough to cover the balance of the mortgage. A deed in lieu of foreclosure is when the bank takes the property in exchange for canceling the loan. Deed in lieu isn't an option if you have a second mortgage or HELOC. Both options presume that the home is not worth as much as is owed on it, because if it were the property could be sold in a regular sale.
HAFA short sales and deed in lieu of foreclosure agreements differ from traditional ones because the lender agrees in advance to waive their right to sue for a deficiency judgment and allows the proceeds from the sale or ownership of the deed to satisfy the debt the homeowner owes. HAFA also allows homeowners to access up to $10,000 for relocation assistance.
The eligibility requirements for HAFA are similar to those for HAMP and include:
When a homeowner falls behind on their mortgage and doesn't have the money to reinstate, they should first try to get a permanent loan modification. If that is not possible, they should try a short sale, and failing that, a deed in lieu of foreclosure. The last two options are preferable to foreclosure, but still result in the loss of the home.
The problem is that some homeowners apply for a loan modification on their own, are denied, and move on to a short sale when they really shouldn't give up. To have the best chance of getting a loan modification, you need to work with someone that has extensive experience getting loan modifications, like a law firm that concentrates its practice in that area. There's no replacement for experience.
What you don't know can hurt you. The stakes (keeping your home) are too high to figure out everything on your own as you go. You need to work with someone who knows when to reapply for a loan modification, when to cut losses and accept a short sale, and how to get you everything you're entitled to under the law and in any of the number of alphabet soup-sounding government programs.
You can learn more about HAFA and HAMP at www.makinghomeafordable.gov.
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