by Laura Bramnick, attorney

HAFA stands for Home Affordable Foreclosure Alternatives Program. It became effective on April 5, 2010. Unfortunately it does not apply to all of us who owe more than our home is worth, nor does it apply to all of us who are in financial distress.

Who does this program help? It helps those who are eligible for HAMP (Home Affordable Modification Program) but are unable to keep their homes. To be eligible it must be your primary residence and you obtained your first mortgage prior to January, 2009. You can have a jumbo loan, but no all jumbo loans qualify. Only those up to $729,750 qualify. Your monthly principal, interest, taxes and insurance must exceed 31% of your gross monthly income.

Lenders and mortgage servicers that participate in HAMP must also implement HAFA. Provisions include preapproved short sale terms. This means that the lender will advise you of the amount of purchase price or net proceeds that they will require BEFORE you even list your property for sale! The lender is required to act quickly when you get an offer and send the contract to them for review. If the lender approves it, they may pay you $3,000 toward relocation costs. Deficiency will be released and will be reported to the IRS as forgiven debt. Since this is your principal residence, you may be entitled to relief from income taxes that may result.

So far so good. Here are limitations of the program:

• Sale must be “arms length” meaning that you cannot sell to a friend or family member
• Lender does not have to approve if they will fare better in a foreclosure
• Mortgage insurance company must approve the terms (if applicable)
• Not available for FHA or VA loans
• Lender can require you to make partial mortgage payments during this process
• Does not apply to second homes or rental properties

Despite its limitations, this program is a step in the right direction. If successful, lenders may expand preapproved terms for short sales beyond HAFA. The written guidelines must lead to responsive action on the part of the lenders. We will be watching and waiting….


Learn more from Laura at her Distressed Homeowner Seminars.  The next two are Tuesday, May 18th 6pm and Tuesday June 15th at 6pm.  Both are held at our Mesa office 560 W Brown Road, 3rd Floor, Mesa, AZ  85201. 

Register by calling 480-344-4072 or by filling in the "Contact Us" box on this page.  Please indicate which seminar you would like to attend.