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Home Affordable Foreclosure Alternatives (HAFA)
A “Making Home Affordable” Initiative
This document is proprietary and solely for the use of AssetPlanUSA, its clients and/or partners including the California Association of REALTORS®. No part of it may be circulated or reproduced without prior written approval from AssetPlanUSA. This document is not endorsed by any government department. Revised 07-2011
MARKET BACKGROUND
Worst housing and economic crisis since Great Depression with over
10 million families affected!
6
FORECLOSURE ALTERNATIVES MARKET BACKGROUNDWHAT ARE THE NUMBERS?
June 2011
• 4.1 million delinquent or in some stage of foreclosure
• 2.6 million HAMP/HAFA eligible 60+ day delinquent loans
• As of July 2011, there are 675,447 active permanent HAMP modifications
• Total U.S. delinquency rate was 8.34%
• Unemployment rate nationwide 9.1% (nearly 14.1 million Americans unemployed) with California at 12%
• 6.2 million estimated “long-term unemployed”
• 12,888 successful HAFA transactions completed
• Any borrower who either fails or is denied a loan modification is someone who should consider foreclosure alternative options.
*Source: Making Home Affordable Program Servicer Performance Report Thru July 2011, (as of 9//01/2011, Housing Scorecard www.financialstability.gov August 2011; Lender Processing Services Mortgage Monitor thru July 2011; U.S. Dept of Labor, Bureau of Labor Statistics August 2011
MAKING HOME AFFORDABLE INITIATIVE
Launched in early 2009
HARP & FHA Refinances Refinance for Underwater Borrowers
HAMP & 2MP: Loan Modification Programs
HAFA: Foreclosure Alternatives Short Sale
Deed-in-Lieu
THE HAMP AND HAFA RELATIONSHIP
HAFA after HAMP Borrower Not Qualified; or Does Not Want Modification
HAFA Short Sale or Deed-in-Lieu Debt Forgiveness
First Lien upon qualification Subordinate liens upon effective negotiation
Relocation Support $3,000
Making Home Affordable (MHA) Plan (Non-GSE)Making Home Affordable (MHA) Plan (Non-GSE)
Determine • Servicer Participation• Program Eligibility • Who Owns the Loan
Determine • Servicer Participation• Program Eligibility • Who Owns the Loan
Permanent Loan(Stay in Home)
Permanent Loan(Stay in Home)
HAMP 90 DayTrial Period
HAMP 90 DayTrial Period
Lender MayOffer HAMP
Before HAFA Options
Lender MayOffer HAMP
Before HAFA Options
Request HAFA(45 day consideration period)
Request HAFA(45 day consideration period)
Possible ForeclosurePossible ForeclosureSuccessful CloseSuccessful Close
HAFA Short SaleDeed-in-Lieu
Deed-for-LeaseRepurchase Option
HAFA Short SaleDeed-in-Lieu
Deed-for-LeaseRepurchase Option
No
No
Yes
Yes
Servicer Participation Listhttp://makinghomeaffordable.gov/contact_servicerhtml
INVESTOR GUIDELINES & CONSTRAINTS
Who Owns U.S. Mortgages?
Investors
Usually Not Also Servicer
Investor Not Bound by MHA Guidelines
o May Add Additional Guidelines
MHA HANDBOOK FOR SERVICERS
Published December 2010
Consolidated Resource for all MHA Information
Supersedes all Treasury Directives Mortgages Not Owned or Guaranteed by
Fannie Mae or Freddie Mac
www.HMPadmin.com
TREASURY HAFA BENEFITS
Investor Benefits
Foreclosure Expense Reduction
Property Condition Maintained
Loss Severities Reduced
Faster Default Resolution
Unpaid Principal Balance$500,000
REO60%
Loss Severity
Short Sale48%
Loss Severity
Investor receives $200,000 Investor receives $260,000
20% less Loss Severity
Effectively, Investor Receives a 30% Higher Return
TREASURY HAFA ELIGIBILITY
HAFA Eligibility - Similar to HAMP Principal Residence
Can be Vacant up to 12 Months Prior
First-lien Originated on or Before January 1, 2009 Delinquent or Will be in the Foreseeable Future Un-paid first lien balance =/- $729,750
2 units - $934,200 3 Units - $1,129,250 4 Units - $1,403,400
Verified Financial Hardship No Longer 31% of Monthly Gross Income
SERVICERS MAY RE-EVALUATE BORROWERS PREVIOUSLY DETERMINED TO BE INELIGIBLE FOR HAFA USING NEW DIRECTIVE
GUIDANCE
IMPLICATIONS OF TREASURY HAFA
Implications for Servicers and Investors HAFA Consideration Mandatory Before
Foreclosure Includes Those Trying HAMP
o Did not qualify for HAMP
o Failed HAMP Trial Period Plan
o Delinquent on a HAMP Payments
o Borrower Requests Short Sale
IMPLICATIONS OF TREASURY HAFA
Implications for the Distressed Borrower
Borrower’s Responsibilities: Must Cooperate with Real Estate Professional Must Deliver Clear Title Must Maintain Property Borrower Occupancy
o Can be Vacant Up to 12 Months Prior to SSAo Borrower Didn’t Purchase Another Homeo Unless Servicer Offers HAFA Deed-for-Lease
TREASURY HAFA INCENTIVES
$3,000 Borrower Relocation Incentive $1,500 Servicer Incentive 1st Lien Investor Incentive
o Partially Reimbursed by Treasury (Up to $2,000)
o Allow Portion of Gross Sale Proceeds Paid to Subordinate Lien Holders ($6,000 Aggregate Cap)
o Servicer, on Behalf of Investor Determines Amount of UPB Paid to Subordinate Liens
o Servicer Must Include How Subordinate Liens Will be Paid in HAFA Policy
TREASURY HAFA ROLES & RESPONSIBILITIES
The Distressed Borrower Respond According to Timelines
o No Less Than 14 Days from Borrower Solicitation or SSA Mailing
Provide Hardship Informationo Request for Modification & Affidavit “RMA”
or Signed Hardship Affidavit
List Property According to SSA Guidelines
Comply With Terms Spelled Out in the SSA
TREASURY PROCESS AND DOCUMENTS
The Treasury HAFA Process – Standard
Request for Modification Affidavit (RMA) or Signed Hardship Affidavit, Plus
Two unique documentso Short Sale Agreement (SSA)o Request for Approval of Short Sale (RASS)
TREASURY HAFA PROCESS & DOCUMENTS
Request for Modification and Affidavit
Submitted at Start of Process
Servicer Review for HAMP
If Denied HAMP, HAFA Offered
SSA Then Generated
o Borrower Returns Document to Servicer in 14 Days
Pre-set List Price and Terms
TREASURY HAFA PROCESS & DOCUMENTS
Short Sale Agreement (SSA) Overview
Generated by Servicer Giving:
o Program Details
o Pre-Approved Terms and Conditions
o Borrower Agrees
o Property Listed After SSA Received
o Real Estate Professional Acknowledges
TREASURY HAFA PROCESS & DOCUMENTS
Request for Approval of Short Sale - RASS
Generated by Servicer
Sent with the Short Sale Agreement - SSA Completed by Borrower and Real Estate
Professional
Re-States Relevant SSA Terms
Final Transaction Details
TREASURY HAFA PROCESS & DOCUMENTS
Request for Approval of Short Sale - RASS
TREASURY HAFA PROCESS & DOCUMENTS
RASS Disapproval of Short Sale
Why Disapproved?
o Didn’t Comply
o Documents Not Included
o Proceeds Insufficient
TREASURY HAFA PROCESS & DOCUMENTS
Treasury HAFA Process – Alternative RASS
Property Already Listed Executed Contract Received Submitted by Real Estate Professional After
Offer Receivedo Part of HAFA Package
Servicer to Respond to Borrower No Later than 45 Days From Receipt of Request
o Response May be Approval, Disapproval or Counter-Offer
TREASURY HAFA PROCESS & DOCUMENTS
Deed-in-Lieu Agreement – DIL
Borrower Voluntarily Transfers Property If Available – Offered in SSA or DIL Agreement Deed-for-Lease or Repurchase Option Incentives Still Available Full Release of Debt Clear & Marketable Title
HAFA PROCESS: STANDARDHAFA SHORT SALE
STANDARD PROCESS TIMELINE TRIGGER / COMMENT
• Servicer solicitation or Borrower solicitation
• Servicer must give written response to request in 10 business days
45 calendar days
• Borrower requests HAFA consideration• Borrower fails HAMP Trial Period or
HAMP Modification• Lender/Servicer offers program
• Borrower receives SSA• Broker and Borrower Sign and
return SSA with stipulated documents
14 calendar days
• Lender/Servicer sends Borrower an SSA for Short Sale during the 45 day consideration period
• Short Sale Agreement Duration 120 - 365 days• Effective Date is date the SSA is mailed to
borrower
• Submittal of a Sales Contract, RASS and stipulated documents
3 businessdays
• Borrower executes a Sales Contract for the sale of their property (contract is bilateral)
• Lender/Servicer mandated response with approval or disapproval
10 business days
• Lender/Servicer receives executed Sales Contract, RASS and stipulated documents
• Must approve if SSA terms are met• Approval or Disapproval must be in writing
• Closing45 calendar days
(minimum)• Transaction is approved• May be shortened with borrower’s consent
HAFA PROCESS: ALTERNATIVEHAFA SHORT SALE
ALTERNATE PROCESS TIMELINE TRIGGER / COMMENT
• Borrower requests HAFA using the Alternative RASS
• Servicer must give written response to request in 10 business days
45 calendar days• Borrower requests HAFA consideration
after an offer has already been submitted for approval
• Transaction approval, disapproval or counteroffer
10 business day approval
• Lender/Servicer approves Borrower for the HAFA Alternative RASS transaction
• Closing45 calendar days
(minimum)• Transaction is approved• May be shortened with borrower’s consent
*Effective June 1, 2011, as of Supplemental Directive 11-02
PRIMARY CHANGES SINCE LAUNCH
TREASURY HAFA ONLY
Supplemental Directive 10-18 Announced December 2010-Effective February 2011
oMonthly Gross Incomeo Vacating the Propertyo Subordinate Lien Releaseo Alternative Deed-in-Lieuo AltRASS Timing
PRIMARY CHANGES SINCE LAUNCH
TREASURY HAFA ONLY
Supplemental Directive 11-02 Announced March 2011-Effective June 2011
o Validation of Residencyo Acknowledgement of Receipto Response in 45 Dayso If Not Able to – Every 15 Days
PRIMARY CHANGES SINCE LAUNCH
TREASURY HAFA ONLY
Supplemental Directive 11-04 Announced May 2011-Effective September 2011
o Assignment of Relationship Managero Assigned by no later than November 2011o Notification within 5 business days of
assignment
PRIMARY CHANGES SINCE LAUNCHTREASURY HAFA ONLY
Supplemental Directive 11-08 Announced August 2011 Partially Effective Immediately, or by October 2011
o Template Matrix at HMPAdmin.com Property ValueAdditional Eligibility Policies
o Borrower Communication TimelinesProactive Contact – 14 Days
o Use of HAFA over Proprietary SS/DIL
PRIMARY CHANGES SINCE LAUNCH
TREASURY HAFA ONLY
Supplemental Directive 11-08 - Continuedo Subordinate Liens
$6000 – MortgagesOther Lien Holders
o Re-Evaluation of Valueo Use of Relocation Incentive
Transaction CostsNOT Release of Mortgage or Non-Mortgage Liens
FANNIE MAE AND FREDDIE MAC HAFA
Key Similarities
HAMP Review Before HAFA
Eligibility the Same as Treasury HAFA
o 31% of Gross Income Still Applies
Forms and Processes the Same
FANNIE MAE HAFA
Fannie Mae Key Differences
Borrower May Not Qualify If: Foreclosure is Imminent – within 60 days
Borrower May Still Qualify If: Relocation for employment within prior 90 days
FREDDIE MAC HAFA
Freddie Mac Eligibility Differences:
Borrower Must be 60+ Days Delinquent
Allowable Transaction Costs Capped
o Total Closing Costs 9%
Maximum Commission 6%
Alternative RASS Not Permitted
Documents Cannot be More Than 90 Days Old
Mandates Monthly Mortgage Payments
o Not to Exceed 31% of Gross Income
FANNIE MAE / FREDDIE MAC HAFA
Borrower’s Financial Condition: Borrower Cannot Contribute to Sale
o HAFA Requirement No Borrower Promissory Notes Permitted Maximum Cash Reserves
o 3 x PITI or $5,000 (whichever is higher) Borrower Surplus Income May Cause Non-
Qualification
FANNIE MAE DEED-FOR-LEASE
Fannie Mae Deed-for-Lease
Deed-for-Lease Program (D4L)
Borrower stays as Tenant
o No Repurchase Option
No Lease-Back or Repurchase Program for Freddie Mac HAFA
FANNIE MAE / FREDDIE MAC HAFA
Servicer Duties and Responsibilities List Price
FREDDIE MAC: 90 days “as is” Price
Listing Agent Accountability - Monthlyo Marketing Plan and Updated Comps
Price Adjustments o Within MANP
Clear Title Minimum monthly payment 31% Freddie Mac
o Additional termination requirements
Source: Fannie Mae Announcement SVC-2010-07
RESOURCES
Additional Sources: www.makinghomeaffordable.gov (Consumers)
www.hmpadmin.com (Servicers and Professionals)
www.financialstability.gov
www.FreddieMac.com
www.eFannieMae.com
Questions or Escalated Issues May be emailed Treasury:
[email protected] (Escalated Issues)
[email protected] (Questions)
CONTACT INFO
858-774-7063
Sept 7 2011 for CVAR Members
www.car.org & www.cvar.org
