The Home Affordable Foreclosure Alternatives commonly known as the (HAFA) Program provides additional options to avoid costly foreclosures and offers incentives to borrowers, servicers and investors who utilize a short sale or deed-in-lieu (DIL) to avoid foreclosures. HAFA alternatives are available to all HAMP-eligible borrowers who: 1) do not qualify for a Trial Period Plan; 2) do not successfully complete a Trial Period Plan; 3) miss at least two consecutive payment during a HAMP modification; or, 4) request a short sale or DIL.

In a short sale, the servicer allows the borrower 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. Generally, if the borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the servicer – provided the title is free and clear of mortgages, liens and encumbrances. With either the HAFA short sale or DIL, the servicer may not require a cash contribution or promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower.

HAFA simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation.

The process of applying to the bank for a short sale is much like the process of getting the loan, only in reverse. Financial statements must be prepared. A hardship must be disclosed to the bank in the form of a hardship letter. A market value must be established. Contact must be made with the bank to determine what their requirements are. In general there is work to be done.

Before a short sale can be accepted there must be a purchaser for the home. The place to start is to hire a real estate agent who is familiar with the process and can orchestrate the short sale transaction with the bank while marketing the property to find a buyer. Yes, it’s a balancing act not meant for amateurs.

A short sale specialist normally is a real estate agent who has significant real estate experience, not in just short sales but broad based credentials that cover the many facets of the real estate business. The real estate agent needs to know how to get to the right person at the financial institute, what to say when you reach them and most importantly how to build the case of the homeowner.

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