The Home Affordable Modification Program (HAMP) Modified

By: Alicia Pinder | Views: 921 | Date: 01-Feb-2011

HAFA is an enhanced define and creased program to offer help to persons who are facing foreclosure by working on short sales and DIL as feasible alternatives.

Thelatest reports on the mortgage front appear to be very disheartening.With as many as 25% Americans living underwater on their mortgages, ithas virtually made the federal Government to sit up and assess theemerging situation. Furthermore, it has prompted the State treasury toink new amendments to the currently operational Home Affordable Modification Program (HAMP).The guidelines of the novel program have in-built mechanisms to provideincentives to lenders for allowing some underwater homeowners to helpthem to short sale their homes for less than they owe on their currentmortgages and freeing them off the hook for the balance loan amounts.It is this salient feature that distinguishes it from the Obama homeloan modification plan aimed at making homes more affordable.

Anotheralternative under the scheme permits the distressed homeowner to deedtheir property back to the lender that is popularly called thedeed-in-lieu of the foreclosure. These are the tenets of the proposedHome Affordability Foreclosure Alternatives Program (HAFA). However, toqualify for the plan, struggling homeowners need to satisfy certaineligibility criteria. These invariably include borrowers who eithercould not get approved for the already existing Obama Loan Modification Program or the HAMP,secured a trial loan modification refinance but not a permanent oneunder HAMP or borrowers who have consecutively defaulted twice on theirloan modifications. Thus, the HAFA intends to regulate the ongoingforeclosure crisis by providing workable options to strugglinghomeowners for whom loan modification programs have not been conducive.

Very recently the treasury department issued fresh guidelines for a Home Affordable Foreclosure Alternatives Program (HAFA). This invariably supplements President Obama's Loan Modification Plan.It is quite interesting to see how the program works. The HAFA offers acomposite agenda with a lot of guiding principles and forms that havebeen structured to reorganize and make things easier for strugglinghomeowners with regards to short sale and modifications, deed-in-lieuof foreclosure (DIL). Conversely, the HAFA accords a viable option to the existing distressed homeowners who already qualify for the Obama Loan ModificationProgram but are still not in a position to salvage their homes. Itclassically, utilizes the previous information of financial hardshipsthat is already garnered when considered for a loan modificationearlier. The HAFA goes a step further in facilitating pre-approvals forterms that relate to short sales prior to listing of the property.These invariably include the minimum adequate net proceeds. Guidelinesadditionally forbid loan providers to desist from reducing real estatecommission complied upon in the listing agreement, with a ceiling of upto 6%. Besides, the conditions of the Home Affordable ForeclosureAlternatives Program (HAFA) also stipulate that borrowers be fullydischarged from the any obligations of the first mortgage debt. TheHAFA, additionally, provides for setting up innovative standardprocedures, documents and deadlines and even offers financial rewardsto all the parties involved. That includes $1500 to distressedhomeowners towards relocation assistance, $1000 to servicers forcovering up administrative and processing costs and up to $1000 forinvestors who facilitate unto $3000 towards short sale proceeds whichis to be distributed sub-ordinate lien holders in a ratio of 1:3.

Hence, the proposed Home Affordable Foreclosure Alternatives Program (HAFA)which is very much a part of the Making Home Affordable Program laysdown terms and conditions for regulating short sale and deed-in-lieu offoreclosure. As per the rules of the HAFA, a distressed homeowner couldget rid of his property at a price that is considerably less than theloan amount due on the mortgage. Over and above, the value of the homepermitted to be sold is pre-determined through a process of appraisalconducted by an independent real estate agent. Thus, the homeowner isnot the deciding authority for the minimum price. Contrary to this, ina deed-in-lieu of foreclosure, the house owner is required to surrenderhis property along with its title back to the loan provider.Consequently, in a short sale the lenders do not have to go through theprocess of a foreclosure on a property that has total unpaid dues inthe range of $20,000 to $40,000. Besides, the credit of a borrower isnot affected much in a short sale as much as it is in a foreclosure.

Author Resource: The government has announced the home affordable foreclosure alternatives program (HAFA),which provides financial incentives help to persons who are facingforeclosure. For more visit Refinanceitt.com and apply for program.

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