In the beginning of December we received our first copy of the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA). An agonizing 43 page document for us to read, but a great step forward for our members and clients who have been struggling with the lack of consistency  and accountability in the short sale process for the last two years.

HAFA is a complex program, and designed to simplify and streamline the use of short sales and deeds-in-lieu of foreclosure. The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements. Fannie Mae and Freddie Mac are working to release their own versions of HAFA by the end of the year and we are still uncertain if that will be rolled out prior to the April 5th date set for everyone else. The National Association of REALTORS® played a major role in the formulation of many of these guidelines and deserves our appreciation for moving this process in the right direction for our agents and homeowners who have felt ignored and abused by their lenders.

Some of the ways that the program will help homeowners and REALTORS®

• It will provide a streamlined standardized way to conduct a short-sale and Deed-in-lieu.

• It uses the borrower’s financial and hardship information already collected in connection with consideration of a loan modification.

• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

• Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).

• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).

• Uses standard processes, documents, and timeframes/deadlines.

• Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).

If you are representing short sales currently or plan to next year we strongly encourage you to go to the following link https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf and download the document entitled “Supplemental Directive 09-09 Introduction of Home Affordable Foreclosure Alternatives – Short Sale and Deed-in-Lieu of Foreclosure”This form contains the qualification requirements for your homeowners, the required sample letters for you to provide your clients, and the timetables required of borrowers.