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HAFA Series Part 4 – What else should I know about Home Affordable Foreclosure Alternatives?

By Kathryn Bovard

This is part 4 in a 5 part series on HAFA.  HAFA is the Home Affordable Foreclosure Alternatives program from the U.S. Treasury effective April 5, 2010.  HAFA is designed to complement the HAMP program and is expected to streamline and standardize the short sale process for qualified homeowners.

Here are some other HAFA program guidelines to understand:

  • The deal must be “arms length.” Borrowers can’t list the property or sell it to a relative or anyone else with whom they have a close personal or business relationship.
  • The amount of debt forgiven might be treated as income for tax purposes. Under a law expiring at the end of 2012, however, the tax may not apply. Forgiven debt will not be taxed if the amount of forgiven debt does not exceed the debt that was used to acquire, construct, or rehabilitate a principal residence. Check with a tax advisor.
  • The servicer will report to the credit reporting agencies that the mortgage was settled for less than full payment. There will be a negative effect on credit scores.
  • 90 day “No-Flipping” term: Buyers may not sell and transfer title of the property within 90 days after closing.

The U.S. Treasury announced new enhancements to the HAMP and HAFA program on March 26, 2010:

Enhancements to the Incentives portion of HAFA:

  • Increases incentives to provide more homeowners with foreclosure alternatives
    • Doubles the relocation assistance payment for borrowers successfully completing a foreclosure alternative (HAFA short sale) to $3,000 from $1,500.
  • Increases servicer incentive payments from $1,000 to $1,500 to increase use of foreclosure alternatives and encourage additional outreach to homeowners unable to complete a modification.
  • Increases payoffs to subordinate lien holders who agree to release borrowers from debt. The new payoff schedule allows servicers to increase the maximum payoff to subordinate lien holders to 6 percent (it was 3%) of the outstanding loan balance and doubles from $1,000 to $2,000 the incentive reimbursement that is available to investors for subordinate lien payoffs, subject to an overall cap of $6,000.

Read the rest of the series on HAFA:

Are you a Las Vegas Homeowner facing a possible foreclosure or considering a short sale? Contact us today to discuss your options and/or to see if you qualify for HAFA.

Call Kathryn at 702-348-7191 or Stephanie 497-7705.

Related posts:

  1. HAFA Series Part 1 – What is the Home Affordable Foreclosure Alternatives Program?
  2. HAFA Series Part 5 – Can I Request a HAFA Short Sale without doing a HAMP modification?
  3. HAFA Series Part 3 – Which loan servicers are participating and review of the timeframes

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