HAFA is an acronym for Home Affordable Foreclosure Alternatives. It's the government's attempt to streamline short sales for sellers in distress. Sellers must meet certain criteria to be eligible for HAFA, but generally speaking, if a seller is eligible for HAMP, the seller is eligible for HAFA.
Highlights of the Fannie Mae HAFA Short Sale Program
The program began August 1, 2010 and sunsets on December 31, 2012. It was designed to help only those who cannot afford to pay their mortgages and whose homes are underwater. If a seller does not fit in both categories, a seller probably does not qualify for a Fannie Mae HAFA short sale.
To find out if your loan is held by Fannie Mae, go to Fannie Mae Loan Lookup. Here is what a Fannie Mae HAFA short sale offers:
- Release of personal liability -- no deficiency judgment
- Financial incentives to the servicers
- Payment of $8,500 to 6% cap for the second lender, if any
- Relocation payment to the seller of $3,000
- Traditional commission to the agent, without a substandard discount
Reasons a Fannie Mae HAFA Short Sale Might Be Turned Down
The government is taking a loss if it grants a Fannie Mae short sale. If the seller has enough money to reduce that loss, the government will probably reject the short sale and convert it to a traditional Fannie Mae short sale. Upon conversion, Fannie Mae might demand a seller contribution.
- If a seller can afford to make the mortgage payments but chooses not to, the Fannie Mae HAFA Short sale will be denied. Unlike a regular HAFA, the PITI plus any HOA should exceed 31% of the borrower's gross monthly income.
- If a seller has cash reserves that are equal to 3 times the PITI payment or $5,000, whichever is greater, the Fannie Mae Short Sale might be denied.
- If a foreclosure is pending, there is a small window of opportunity to submit for approval of a Fannie Mae HAFA short sale, and sellers who are outside of that window will get rejected without written consent from Fannie Mae. It is best to apply for a Fannie Mae HAFA short sale before a loan is officially in default.
- Although the government doesn't like to publicize this fact, Fannie Mae used to expect sellers to stop making mortgage payments. If the payments were current, Fannie Mae was unlikely, with very few exceptions, to consider the seller for a Fannie Mae HAFA short sale, much less a regular Fannie Mae short sale. However, as of November 1, 2012, the FHFA, which oversees Fannie Mae, says sellers can be current and still do a Fannie Mae short sale, providing there is a hardship.
- If the home is vacant, sellers need to provide evidence that they have moved at least 50 miles away and that they have not bought a new home within 90 days of the date on the short sale agreement, SSA form 184. This is intended to stop buy and bail.
- If foreclosure is eminent and Fannie Mae decides it prefers to foreclose, it has the right to reject a Fannie Mae HAFA short sale and pursue foreclosure. In other words, the government writes the rules, and Fannie Mae is a government-sponsored enterprise (GSE).
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.
