The HAFA Program – Foreclosure Alternatives for Homeowners

Assistance available to avoid foreclosure using the HAFA program.

Understanding the Short Sale / Deed-in-Lieu guidelines and application process

The HAFA program expired in December 2016 and is no longer available. Speak to one of our certified counselors to discuss other options that may be available to you.

The Home Affordable Foreclosure Alternatives (HAFA) program is for borrowers who, although eligible for the government Home Affordable Modification Program (HAMP), are not able to secure a permanent loan modification or cannot avoid foreclosure. HAFA provides protection and money to eligible borrowers who decide to do a Short Sale or a Deed-in-Lieu of Foreclosure.

HAFA Benefits to the Homeowner

Homeowners who are eligible for HAFA (see Qualifications and Eligibility below) are given an equitable way to avoid foreclosure by performing a Short Sale or by giving the property back to the lender – known as a Deed-in-Lieu of foreclosure (DIL).  Homeowners benefit by receiving fair time frames for completing each step of the process, compensation for moving expenses, and protection from collection actions by their lenders. Some of the key benefits are:

  • Borrowers receive $3,000 for relocation assistance.
  • Lenders must allow the opportunity for the borrower to attempt a Short Sale or accept a Deed-in-Lieu of foreclosure before following through with a foreclosure.
  • Borrowers are fully released from future liability for the first mortgage debt – lenders cannot ask for a cash contribution, promissory note, or deficiency judgment to complete a short sale or DIL.  Additionally, junior lien holders (i.e. 2nd mortgages) who participate in the HAFA incentives must also release borrowers from future liability.
A sign in front of house with the text "Avoid foreclosure" showing alternatives for homeowners via the HAFA program.

Qualifications and Eligibility

You may be eligible for HAFA if you meet all of the following criteria:

  • You have a documented financial hardship.
  • You have not purchased a new house within the last 12 months.
  • Your first mortgage is less than $729,750.
  • You obtained your mortgage on or before January 1, 2009.
  • You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering, or tax evasion in connection with a mortgage or real estate transaction.
  • Your mortgage is owned or guaranteed by Fannie Mae and Freddie Mac.

Given that the borrower, mortgage, and servicer all meet the above qualifications, then the lender must consider HAFA if the borrower:

  • Is denied a HAMP trial-period plan.
  • Does not successfully complete a HAMP trial period plan or is denied a permanent HAMP modification.
  • Is delinquent on a HAMP modification (misses at least 2 consecutive payments).
  • Requests a short sale or DIL.

How to Apply for HAFA

Short sales and DILs are complex transactions involving coordination and cooperation among a number of various parties. Fortunately, the HAFA program simplifies and streamlines the process.

HUD-approved, nonprofit housing counselors are available to answer your questions, determine your eligibility for the HAFA program, and communicate with your lender to get your application started at no charge to you.

Talk to a housing counselor now »

Article written by
Melinda Opperman
Melinda Opperman is an exceptional educator who lives and breathes the creation and implementation of innovative ways to motivate and educate community members and students about financial literacy. Melinda joined credit.org in 2003 and has over two decades of experience in the industry.

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