November 30, 2009, Supplemental Directive 09-09: Introduction of Home Affordable Foreclosure Alternatives – Short Sale and Deed-in-Lieu of Foreclosure was published.
Overview
Supplemental Directive 09-09 provides guidance to servicers on the Home Affordable Foreclosure Alternatives Program (HAFA) and includes the general terms and conditions, evaluation process, documentation, and reporting requirements. As part of the Home Affordable Modification Program (HAMP), HAFA provides financial incentives to servicers and borrowers who utilize a short sale or a deed-in-lieu (DIL) to avoid foreclosure on a HAMP-eligible loan.
Foreclosure Alternatives
The HAFA program simplifies and streamlines the use of short sale and DIL options by incorporating the following unique features:
- Complements HAMP by providing viable alternatives for borrowers who are HAMP eligible.
- Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis.
- Allows the borrower to receive pre-approved short sale terms prior to the property listing.
- Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement.
- Requires that borrowers be fully released from future liability for the debt.
- Provides financial incentives to borrowers, servicers, and investors.
Timing & Eligibility
Servicers – Supplemental Directive 09-09 is effective April 5, 2010, but participating servicers may elect to implement HAFA prior to April 5, 2010, in accordance with the Supplemental Directive. In order to participate in HAFA, a servicer must have executed a HAMP Servicer Participation Agreement (SPA) by December 31, 2009. (The HAMP SPA is available for review on HMPadmin.com.)
Borrowers – Servicers must consider a HAMP-eligible borrower for HAFA in accordance with their policies within 30 calendar days of the date the borrower:
- Does not qualify for a HAMP Trial Period Plan,
- Does not successfully complete a HAMP Trial Period Plan,
- Is delinquent on a HAMP modification by missing at least two consecutive payments, or
- Requests a short sale or DIL.
A borrower must be considered for a HAMP modification and other retention programs offered by the servicer prior to being considered for HAFA.
Tags: Home Affordable Modification, loss mitigation, workout
January 6th, 2010 at 11:03 am
My Modification loan has been denied. Do you have any other choices?
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Todd Temaat Reply:
January 11th, 2010 at 11:16 am
The first thing I’d recommend is trying to get your servicer to provide you with all the information they used when they decided you didn’t qualify. They often use old or incorrect information. If this is the case or your situation has changed substantially since you first applied, you can appeal the decision based on these facts. It may be an uphill battle and you may need an attorney to do it, but it is possible.
If the info they used was correct and your position hasn’t changed substantially, I’d recommend saving every penny you can (including your mortgage payments if you’re still making them) and prepare to move out. Find out when they expect to finish the foreclosure action (assuming it’s already started) and how long it takes in your state to evict after a foreclosure sale. Then plan your move just before they evict you. This will hopefully give you several months of house payments you can use to get started in the new place.
If you’re thinking about filing bankruptcy, it will slow the foreclosure down, but it’s unlikely to stop it unless you can afford the bankruptcy payments.
You might talk to the HopeNow coalition or to a HUD Housing Counselor to see if they come up with any other options.
Reply
Todd Temaat Reply:
January 22nd, 2010 at 11:15 am
You can try some of the legal defenses (check out the legal section of the site). This might delay the sale enough to get you back on your feet. You could also talk to a HUD Housing Counselor or call HOPE Now at 888-995-HOPE and see if they recommend anything.
If none of those options will work, I’d recommend saving whatever you can and preparing to move out. Find out when the sherriff’s sale is and then move out just ahead of it. Start looking for an apartment or house to live in now and see what they’ll require for deposit, first month’s rent, etc.
Hope for the best and plan for the worst!
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