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Home Affordable Foreclosure Alternatives Program (HAFA)

    Many homeowners may feel that they can no longer afford their home, but want to avoid the negative effects of foreclosure. The Home Affordable Foreclosure Alternatives (HAFA) Program offers homeowners, their mortgage servicers, and investors an incentive for completing a short sale or deed-in-lieu of foreclosure. With these options, under HAFA, a homeowner leaves their home to transition to more affordable housing and alleviate the mortgage debt they owe.

These options are available for homeowners who:

1. do not qualify for a trial mortgage modification under the Making Home Affordable Program.

2. do not successfully complete the trial period for their modification.

3. miss at least two consecutive payments during their modification period.

4. request a short sale or deed-in-lieu of foreclosure.

Short Sale

    In a short sale, the servicer allows the homeowner to list and sell the mortgaged property with the understanding that the net proceeds from the sale may be less than the total amount due on the first mortgage. 

Deed-in-Lieu of Foreclosure

    Generally, if the borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a deed-in-lieu of foreclosure. With a deed-in-lieu, the borrower voluntarily transfers ownership of the property to the servicer— provided the title is free and clear of mortgages, liens, and encumbrances.

    The HAFA Program streamlines both of these options to make them easier for a homeowner to work with their servicer. Under the program, a homeowner can receive $3,000 to help with relocation costs.

    Mortgage servicers and investors write their own guidelines under the Federal requirements to determine how to implement the program. For more information about your options, you should contact your mortgage servicer. If you have questions about the program, or want guidance about how these options may impact your personal situation, you may wish to speak to a HUD-approved housing counselor for free.

Making Home Affordable and Other Options to Remain in Your Home

    Mortgage servicers who participate in the Making Home Affordable Program are required to evaluate homeowners for a Home Affordable Modification before evaluating them for other options.  If you request a modification from your mortgage servicer, and are determined to be eligible, you will enter into a trial period plan.

    If it is determined that you are not eligible for a Home Affordable Modification, your mortgage servicer will evaluate you for other alternatives they offer to keep you in your home, such as their own modification programs or a forbearance.

    A HUD-approved housing counselor can work with you for free to help you understand your options.

HAFA Frequently Asked Questions

What other alternatives to foreclosure exist within the Making Home Affordable Program?

    The Making Home Affordable Program will include additional foreclosure avoidance options through the Home Affordable Foreclosure Alternatives (HAFA) Program. While the HAFA Program becomes effective April 2010, servicers may participate immediately, or as soon as is practical. The primary options available through HAFA include Short Sale and Deed-in-Lieu of Foreclosure.

How does the HAFA Short Sale work?

    In a Short Sale, the homeowner sells the property for less than the full amount due on the mortgage. When a homeowner qualifies for the HAFA Short Sale, the servicer approves the Short Sale terms prior to listing the home and then accepts the payoff in full satisfaction of the mortgage.

How does the HAFA Deed-in-Lieu of Foreclosure work?

    With the Deed-in-Lieu of Foreclosure, the homeowner voluntarily transfers ownership of the property to the servicer in full satisfaction of the total amount due. The servicer may require that the homeowner list and market the property before they agree to a deed-in-lieu arrangement. In order for the Deed-in-Lieu of Foreclosure to work, the homeowner must provide a marketable title, free and clear of other mortgages, liens, or other encumbrances.

How can I be considered for HAFA?

    A participating servicer must consider a homeowner for HAFA if the borrower requests a short sale or deed-in-lieu under HAFA, and a servicer will also consider a homeowner for HAFA within 30 days of the date the homeowner:

• does not qualify for HAMP; or
  
• does not successfully complete a HAMP trial period; or
• misses at least two consecutive payments on a HAMP modification.

    However, before evaluating a homeowner for HAFA, a participating servicer must first consider that homeowner for other loan modification or retention programs that they offer. In addition, pursuant to the servicer's policies, every eligible homeowner must be considered for HAFA by a participating servicer before the homeowner’s loan is referred to foreclosure and before the servicer may allow a pending foreclosure sale to continue.

Supplemental Directive 09-09 Revised: Home Affordable Foreclosure Alternatives Program Guidelines

Guidance to servicers for adoption and implementation of the Home Affordable Foreclosure Alternatives Program (HAFA), which is part of HAMP and provides financial incentives to servicers and borrowers who utilize a short sale or deed-in-lieu to avoid foreclosure on an eligible loan under HAMP.

This document replaces previously issued Supplemental Directive 09-09 and incorporates the substance of Supplemental Documentation - Frequently Asked Questions in connection with the Home Affordable Foreclosure Alternatives Program posted to date.

• Supplemental Directive 09-09 Revised
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  Last updated: March 26, 2010

• Change Template: Supplemental Directive 09-09 Revised NEW
  This document tracks changes made in Supplemental Directive 09-09 Revised.
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