Avoid Foreclosure with HAFA Program?

Has the U.S. Treasury actually designed a program that will help at risk homeowners avoid foreclosure? On November 30, 2009 the Home Affordable Foreclosure Alternatives (HAFA) a supplemental program to HAMP, was announced. I have to admit that inside the 43 pages of guidelines and sample forms is information that homeowners, real estate agents and buyers should like. It sounds good on paper but like all the housing rescue programs that have come before, getting banks and loan servicers to voluntarily participate will be key to its success … even with the financial incentives being offered. The program takes effect on April 5, 2010 but banks and loan servicers have the option to implement sooner if they choose. Here are some highlights of what qualifies for HAFA:

• homeowners who were unsuccessful on obtaining a HAMP loan modification could be considered for a short sale or deed-in-lieu of foreclosure program utilizing HAFA guidelines
• the borrower’s monthly mortgage payment exceeds 31 percent of their gross income
• loan servicer must offer borrowers the HAFA program within 30 days of being ineligibility for a HAMP loan modification
• loan does not have to be owned by Fannie Mae or Freddie Mac
• loan must have been originated on or before January 1, 2009
• loan is for the homeowner’s principal residence
• the mortgage is delinquent or default is likely
• only for a first mortgage that does not exceed $729,750
  

Some features that make the HAFA program unique compared to what’s sellers, buyers and real estate agents are experiencing in today’s short sale market is:

1. HAFA uses the borrower’s financial and hardship information collected during eligibility for HAMP, eliminating the need for additional eligibility analysis
2. allows the borrower to receive pre-approved short sale terms prior to the property listing
3. prohibits the servicer from requiring , as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement
4. requires the borrower ro be fully released from future liability for the debt
5. standardizes the process, documents and timeframes
6. provides financial incentives to borrowers (seller), servicers and banks
   

There is more information including the deed-in-lieu program, so if you have questions about how HAFA could help you avoid foreclosure, I’ll be glad to answer them. Keep in mind, a short sale is a lot more forgiving on your credit than foreclosure and the waiting period to qualify for your next mortgage will be much shorter.

Read my post about the HAMP program

Read my post home ownership after short sale or foreclosure

"Making Home Affordable" the report card ... HAMP & HARP = Hope?

Remember when our government was passing one housing rescue plan after another beginning in late 2007. Banks were "encouraged" to help struggling homeowners modify their loan. That didn't work as foreclosures continued to climb. After taking over Fannie Mae and Freddie Mac they imposed a six month foreclosure moratorium from November 2008 through April 2009. It just delayed the inevitable. That brings us to the $75 billion Making Home Affordable plan.

Making Home Affordable - MHA was announced in February 2009 to help stabilize the housing market. Under this umbrella two seperate programs with different objectives were born. So let's get you up to speed on HAMP (no ... I'm not blowing smoke) and HARP and see it there is any HOPE for you.

Home Affordable Modification Program - HAMP gives financial incentives to mortgage servicing companies for offering trial loan modifications to an estimated 2.7 million at-risk homeowners. To be considered for the program a homeowner must be at least 60 days behind on their mortgage or already in foreclosure.

According to a July 31st Treasury report card, $20 billion has been doled out to more than three dozen large and small servicing companies participating in HAMP with results showing 15% or 400,0000 homeowners out of the 2.7 million eligible have been offered trial modifications that involved reducing the interest rate on a loan for several years and/or extending the term of the loan.

Homeowners who have contacted their loan servicing company asking for a loan modification with little success may find better results by going back and asking for help under the HAMP program.

Home Affordable Refinanace Program - HARP is designed to help responsible homeowners who pay their mortgage on time refinance out of a risky loan into a stable loan and lower their mortgage payment. With declining home values preventing a traditional refinance, HARP allows homeowners to refinance up to 125% of their home's value. To give you an idea of what that would mean, assume a home value of $300,000 with a mortgage of $365,000. Applying 125% to $300,000 = $375,000. That's below the loan-to-value LTV ceiling. Other loan qualifying factors will apply. A key feature of this program ... the homeowner will not be required to get private mortgage insurance PMI if their original LTV ratio was 80% or less.

Fannie and Freddie had been allowing a HARP refinance up to 105%. To help more homeowners, they will increase their LTV ceiling to 125% effective September 19th, 2009. It may take time for mortgage companies to begin offering the 125% refinance option so be prepared. Follow these links to find out if your mortgage is owned by Fannie Mae or Freddie Mac. You can also double check with your existing mortgage servicer to find out who owns your mortgage. Qualified homeowners have the option to apply for a HARP refinance with their existing servicer or shop for a competitive loan with a new lender.

Will The Latest Housing Rescue Plan Help You?

Re-Print from WSJ - MARCH 5, 2009

Mortgage-Assistance Program Offers Desperate Treatment Depending on Goals and Circumstances, By NICK TIMIRAOS

New rules issued by the White House on Wednesday clarify who can take advantage of the latest round of federal efforts to head off foreclosure. President Barack Obama announced his housing stability plan two weeks ago, promising the most far-reaching effort yet by the government to help large numbers of at-risk borrowers. The program has two main components.

One provision will allow diligent borrowers who are current on their mortgage payments but have little or no equity in their homes to refinance their first mortgage to take advantage of current interest rates, which have fallen to near record lows. That is designed to allow responsible borrowers -- mainly those who have been hurt by falling home prices -- to benefit from the current climate. Lenders won't refinance borrowers who don't have equity in their homes.

The second component involves modifying mortgages loans to lower monthly payments to 31% of the borrowers' gross monthly income, mainly by reducing the interest rate on the loan. This effort would target borrowers who are falling behind on their mortgage payments or who are in danger of falling behind. The government will provide financial
incentives to lenders and mortgage servicing companies to encourage them to offer the reduced payment plans, which last for five years. But as with any broad effort, homeowners are treated unevenly in the programs. The refinance provision is open only to borrowers who have loans that are owned by Fannie Mae or Freddie Mac.

That excludes large numbers of borrowers with subprime and other exotic mortgages sold to investors; and borrowers with so-called "jumbo" loans that are too large for government backing. Those groups will be eligible for the modification part of the plan, but only for loans up to $729,750. Borrowers who owe more than 105% of the current value of their home also won't be eligible for refinancing. That means that fewer borrowers in the nation's most over-heated housing markets, including California and Florida, and in some of the most depressed market in the Midwest can take advantage of the program. "Most of the people we serve are too far underwater to take advantage of this," says Dan Elsea, a mortgage broker in Detroit. Nationally, 25% of mortgage holders have conforming loans that are within the 80% to 105% loan-to-value ratio needed to qualify for the program, according to real estate Web site Zillow.com. But that number falls in certain highcost housing markets that have seen big price declines. In Los Angeles, for example, just 9% of mortgage holders are eligible to refinance, while 8% of conforming borrowers are too far underwater, according to Zillow.com.

Another Plan To Rescue The Housing Market

So who owns your mortgage? Fannie Mae, Freddie Mac, your local bank or some unknown investment portfolio? The company you send your mortgage payments to is likely a servicer and not the owner of the mortgage. The reason for the question is because our government announced yet another housing rescue plan. This time it’s $75 billion dollars and focuses on mortgages owned by Fannie, Freddie and banks who took TARP money. Lawmakers estimate the plan will help 9 million households avoid foreclosure. We watched Washington roll out several housing rescue plans in the past six months and were told they would help struggling homeowners. Remember Hope For Homeowners? It bombed. None have proven to stop this slippery slop of foreclosures. The problem with all of these plans is the government cannot force any investor to modify a homeowner’s mortgage. The language associated with these plans is “urge” and “encourage” investors to stop foreclosing and modify. And the latest housing recovery plan offers financial incentives to investors for doing so.

Think about this… if the stabilization and recovery of the housing market is KEY to our economic recovery, why have we spent billions saving Walls Street firms, billions to others and another $787 billion on mostly non-housing stimulus.

New home buyers entering the market are getting great deals but it’s not enough to turn the housing market around by itself. A lot is riding on the latest round of taxpayer money and all we're all paying for it whether it works or not.