If financially struggling homeowners are unable to maintain their current monthly home loan payments, a mortgage modification or refinance could help to lower the monthly payments. Under the Obama’s Administrations Making Home Affordable Program a homeowner may qualify for Home Affordable Modification Program or HAMP to lower their monthly payments. Another alternative is the Home Affordable Refinance Program or HARP.
If the homeowner does not qualify for the HAMP or HARP programs, foreclosure may seem like the only alternative. Under the Obama’s Administrations plan, there may be an alternative to the consequences and pitfalls of foreclosure proceeding. The Home Affordable Foreclosure Alternatives Program or HAFA helps the homeowner avoid the negative affects of foreclosure and can give some assistance for relocation to more affordable housing.
Deed in Lieu of Foreclosure or Short Sale as an Alternative
In accordance with HAFA, the mortgage servicer (lender) can offer the homeowner either a short sale or a deed in lieu of foreclosure. A short sale is when the homeowner sells the home for less than what is owed on the mortgage loan. A deed in lieu of foreclosure means the homeowner releases all property and ownership rights to the mortgage servicer.
As part of the short sale agreement the homeowner will have a set amount time to sell the property, with a minimum of 120 days. Upon successful completion of the sale that’s acceptable the mortgage servicer, the borrower will be released of all liability associated with the unpaid portion the mortgage loan. The borrow will also receive relocation assistance in the amount of $3,000.
If the mortgage opts for a deed in lieu of foreclosure, the borrower must vacate the property by a pre-established date. The property must be in clean saleable condition. The mortgage servicer must also give the borrower a full release of debt and claims against the property.
HAFA Guidelines and Eligibility Requirements
The mortgage servicer cannot solicit the borrower for the HAFA program until they are first considered for a mortgage modification or other offered programs. There are also other requirements that must be met for HAFA eligibility. Some of the requirements include
- First lien mortgage only
- Mortgage lean is delinquent or default is probable
- One to four unit property
- Property not vacant for more than 90 days
- Condemned property is not eligible
- Unpaid principle balance on single unit property is under $729,750
- Borrowers monthly mortgage payment greater than 31% of gross income
- Documented financial hardship
If a mortgage servicer is a participant in the program, they must consider all eligible homeowners before they start foreclosure proceedings. All of the above requirements must be meet to qualify for HAFA. For further information about HAFA or other help with foreclosure concerns, the homeowner can contact the Hope Hotline at 888-995-HOPE.
Source:
Making Home Affordable, website accessed February 18, 2011
James Clausen - Clausen received a Bachelors Degree in Business Administration in Automotive Management and Marketing at Northwood University, graduating ...
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