Module 2:Module 2:US Treasury’sUS Treasury’sHAHAFA FA ProgramProgram

Home Affordable Foreclosure Alternatives13

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Supplemental Directive 09-09RSupplemental Directive 09-09R

• Nov. 30, 2009 HAFA introduced

• April 5, 2010 Effective date

• HAMP servicers must participate in HAFA

• Revised March 26, 2010

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Supplemental Directive 10-18Supplemental Directive 10-18

• Issued Dec.28,2010

• Effective Feb. 1, 2011

• Made significant changes

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HAHAFAFA Short Sale

Deed-in-Lieu

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Home Affordable Foreclosure Alternatives 2-4

HAHAFAFA Eligibility = HA Eligibility = HAMMP EligibilityP Eligibility

• Personal residence, 1-4 family

• $729,750 balance (SFR)

• 1st position loans

• Originated on or before 1-1-09

• Payment on 1st loan exceeds 31% of gross income

• Hardship

• Delinquent or default reasonably foreseeable

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(Deleted by SD 10-18)

HAHAFAFA Features Features• Pre-approved short sale

• Specified time lines

• Commissions protected

• Full release of liability on 1st and subordinate loans

• Foreclosure sale suspension

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HAHAFAFA Features Features (cont’d.)(cont’d.)

• Payment forbearance or reduction

• $3,000 to Seller

• Servicer incentives

• Up to $6,000 for subordinate lien holders

• Investor reimbursement for subordinate lien releases

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Who’s ParticipatingWho’s Participating

• All servicers in HAMP–1st mortgages

–Servicers establish policies based on investor guidelines

–Investors in non-GSE loans may not approve HAFA short sales

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Who’s Participating Who’s Participating (cont’d.)(cont’d.)

• Fannie & Freddie–Are the investors

–Establish separate guidelines

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Borrower SolicitationBorrower Solicitation

• Borrowers solicited if delinquent

• 14 days to respond

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Foreclosure SuspensionForeclosure Suspension• Potentially eligible

borrowers must be considered for HAFA:– Prior to commencing

foreclosure– Before foreclosure sale is

conducted

For non-GSE loans: Pursuant to servicer’s policy

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Foreclosure Suspension Foreclosure Suspension (Cont’d.)(Cont’d.)

• Fannie & Freddie–Special permission

required if foreclosure sale is sooner than 60 days

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Foreclosure Sale is SuspendedForeclosure Sale is Suspended

• While determining eligibility

• During SSA term

• Pending RASS approval

• Prior to closing

Troubled borrowers should start

HAFA process early17

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Borrower Already in HABorrower Already in HAMMPP

• Servicer Must Consider Servicer Must Consider Borrower for HAFABorrower for HAFA… … Within 30 days from date the borrower:– Does not qualify for trial

modification– Does not complete trial

modification– Is delinquent on modification

–Requests a Short Sale

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Borrower Not in HABorrower Not in HAMMPP

• Servicer must consider borrower within 30 days from date the borrower:

–Requests a Short Sale

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If Borrower Not in HAIf Borrower Not in HAMMPP

• Servicer determines eligibility–RMA (Request for

Modification & Affidavit)

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Borrower cannot be applying for modification while pursuing a short sale or vice versa.

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Bankruptcy?Bankruptcy?• Considered for HAFA if

requested

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RMARMA

Request for

Modification and

Affidavit

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Wells Fargo calls it a RFAA

RMA Pg. 1

For HAFA:•Sell property•Primary residence•Owner occupied

Explain Hardship

Other liens

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RMA Pg. 2Income:Must include all except alimony, child support and/or separate maintenance payment

Assets:Do not include life insurance or retirement accounts

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Paragraph 5 is for modifications

RMA Pg. 3

Use servicer’s form which servicer should have modified for short sale

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HAFA Short Sale Flow ChartHAFA Short Sale Flow ChartDetermine if Seller/Borrower meets HAFA eligibility.

Servicer has 30 days to determine eligibility, and issue or deny the SSA.

Borrower requests short sale & submits complete package including RMA

SSA & RASS sent to borrower.• Includes list price or Minimum Net Proceeds

SSA returned to servicer:•Within 14 days•Copy of listing•Other lien info

Marketing:120 days minimum Extensions possible, up to 12 months total

Upon Contract to Purchase:Submit RASS & contract within 3 Biz days of contract acceptance

Servicer approves or disapproves

contract within 10 Biz

Days

Closing. Servicer cannot require closing sooner than 45 days from contract acceptance. Seller receives $3,000 relocation assistance & is released from all liability on all liens.

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Property must be

listed

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Determine Seller’s EligibilityDetermine Seller’s Eligibility

Principal residence

1st mortgage originated on or before 1-1-09

Delinquent or default reasonably foreseeable

Unpaid balance $729,750 or less

Financial hardship

Step 1Step 1

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Principal Residence Principal Residence Exemption:Exemption:

• Vacant or rented to a non-borrower up to 12 months prior to issuance of:– SSA or– Alt RASS and

• Borrower has not purchased another home during 12 months prior to issuance of SSA

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11stst Position/Pre 2009 Position/Pre 2009

• Eligibility based on 1st loan balance & payments• Originated on or before Jan. 1, 2009

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Delinquent or Default ForeseeableDelinquent or Default Foreseeable

• DelinquentDelinquent–more than 60 days latemore than 60 days late

• Imminent default evaluated by Imminent default evaluated by servicer based on borrower’s debts, servicer based on borrower’s debts, expenses, income & assetsexpenses, income & assets

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Maximum Unpaid BalanceMaximum Unpaid Balance

• 1 Unit: $729,750 • 2 Units: $934,200 • 3 Units: $1,129,250 • 4 Units: $1,403,400

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Financial HardshipFinancial Hardship• Reduction/loss of incomeReduction/loss of income• Financial circumstances changeFinancial circumstances change• Increase in paymentIncrease in payment• Increased expensesIncreased expenses• No cash reservesNo cash reserves• Excessive debtExcessive debt• Other reasonsOther reasons

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Financial Information & Payment/Income Financial Information & Payment/Income RatiRatioo

• Financial info may be required by Financial info may be required by servicerservicer

• Treasury HAFATreasury HAFA: Payment not required : Payment not required to exceed 31% of borrower’s income for to exceed 31% of borrower’s income for non-GSE loans non-GSE loans

• Fannie & Freddie require payment to Fannie & Freddie require payment to exceed 31% of gross incomeexceed 31% of gross income

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Request Short SaleRequest Short Sale• Servicer’s forms– Use servicer’s forms– Complete all forms

• Complete RMA

• IRS Form 4506T

• List of servicers at: www.MakingHomeAffordable.gov

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Step 2Step 2

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Servicer EvaluationServicer Evaluation

• Compares Foreclosure/REO proceeds to Short Sale proceeds based on investor requirements

• Denial– Not eligible– Does not meet investor

criteria– Reasons explained

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Step 3Step 3

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Issuance/Denial of SSAIssuance/Denial of SSA

• 30 calendar days from receipt of documents and borrower’s request for HAFA short sale consideration

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Step 3Step 3

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SSA & RASS IssuedSSA & RASS Issued• SSA: Short Sale Agreement– Offers borrower pre-approved short sale – 14 days to accept & return

• Property must be listed

• RASS: Request for Approval of Short Sale– Kept until seller accepts a buyer’s offer

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Step 4Step 4

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Listing the Home

• Required when SSA returned

• Licensee must sign SSA

• Copy returned with SSA

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SSA List Price SSA List Price or Minimum Net or Minimum Net

• Servicer sets:– List price or–Minimum net proceeds

• No increase in minimum net during term of SSA

• Are terms realistic???

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MarketingMarketing

• 120 days minimum

• Extensions possible for up to 12 months total

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Step 5Step 5

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RASS & Purchase AgreementRASS & Purchase Agreement

• Contract & Addenda

• RASS

• Buyer– Proof of funds or

pre-approval letter

• Subordinate lien info

• 3 Biz Days to submit to servicer

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Step 6Step 6

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Approval or DisapprovalApproval or Disapproval

• 10 Biz days

• Approval required if minimums are met

• Cannot require commission reduction

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Step 7Step 7

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ClosingClosing

• Can be ASAP

• Servicer cannot require sooner than 45 days

• 45 days begins at contract acceptance

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Step 8Step 8

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