HAFA Pre-Foreclosure Short Sales
Faster preforeclosure short sales complement HAMP
Advantages of HAFA
Home Affordable Foreclosure Alternative (HAFA) Program became effective on April 5, 2010 to find faster solution and avoid foreclosure. A typical foreclosure process takes time, especially in judicial foreclosure states where the lender/bank must get a court order to foreclose on the property. Some foreclosures take about a year with no happy ending for homeowners who lost their jobs or suffered from bad economic conditions.
HAFA helps homeowners who have already been approved for HAMP to sell their properties in one of the following ways:
- preforeclosure short sale, or
- deed-in-lieu of foreclosures.
Under the first alternative, the foreclosure short sale process is faster as the lender/bank knows that the homeowner has already been approved under HAMP. Foreclosure short sale is already approved with a minimum sale price fixed by the bank. Homeowner saves time as the short sale closes faster, in weeks as compared to months in regular pre-foreclosure short sales.
HAFA is based on popular and advantageous HAMP alternative
Home Affordable Modification Program (HAMP) was created to help an estimated four million homeowners who faced financial hardship due to recent economic conditions. Homeowners are eligible if:
- they were not able to pay their monthly mortgage installments and face imminent risk of default;
- they live in the property as primary resident; and
- their mortgage loan was originated before January 1, 2009 and the unpaid loan principal amount is $729,750 (for one-unit property).
HAMP reduces the interest rate as low as two percent, may extend the loan term to 40 years, and may defer the portion of the principal amount and waive the interest on deferred amount.
You may further information on Home Affordable Modification Program administered by Fannie Mae.
How can you buy preforeclosure homes under HAFA at below-market prices and faster?
HAFA Program started to prevent foreclosures on loans that are eligible for modification under HAMP. HAFA kicks in if HAMP-approved homeowners are not able to keep their homes. Lender/bank knows that homeowner has been approved by the government under HAMP. So, preforeclosure short sale is faster as the bank already set a price attractive enough to conclude the sale so that the distressed homeowners do not suffer for longer periods and the bank gets some cash limiting further losses.
HAFA is win-win for all parties: homeowners avoid foreclosure (default and bad credit), bank gets cash and eliminates bad loans, investors or new owners buy real estate properties at below-market prices in a short period of time. Homeowners owing more than the actual value of their homes sell their homes, payoff their loans at lower amounts and get $3,000 for relocation expenses.
Investors get $1 for every $2 in paying junior liens not to exceed $2,000 or six percent of the unpaid balance. In many cases, lender/banks negotiate with the secondary lien holder and deliver clear title to investors.
HAFA process is fast and simple
Here's the fast procedure:
- Bank/lender issues HAFA Short Sale Agreement after evaluating HAMP and determines that homeowner/borrower is not able to continue under HAMP.
- Homeowner/borrower find an investor/buyer through a real estate agent and agrees on terms of sale, including sale price.
- Lender/bank issues HAFA Short Sale Agreement. Homeowner/borrower, after agreeing with investor submits the offer to the bank/lender for Request for Approval of Short Sale (RASS).
- Bank/lender approves the RASS within 10 days.
- Investor/new owner closes on the pre-foreclosure short sale property in about 45 days.
Do you have any restriction as a new owner of the short sale property? Yes, you cannot resell it for 90 days. That's it!