Major news in the short sale and housing industry! On Friday, March 9, the Obama Administration announced updates to the Home Affordable Foreclosure Alternative (HAFA) program. Created in 2009, HAFA is a government-sponsored initiative assisting all Home Affordable Modification Program (HAMP) eligible homeowners in avoiding foreclosure through short sales and deed-in-lieus.
The HAFA updates will go into effect on June 1, 2012, and will allow more distressed homeowners to seek assistance. Most importantly, the deadline for submitting for HAFA eligibility will be extended a full year, from December 31, 2012, to December 31, 2013.
Other major changes from March’s updates to the HAFA program include:
- The removal of occupancy requirements. Previously, HAFA required homeowners to have lived in the property within the last 12 months.
- $3,000 relocation incentives will be limited to properties occupied by an owner or tenant at the time of the short sale.
- Mortgage payments will be allowed to exceed 31% of the homeowner’s gross monthly income. This update will allow a homeowner to stay current on her mortgage and still qualify, minimizing the overall impact to her credit.
- Secondary lienholders may receive up to a maximum of $8,500, up from $6,000 previously.
- And one of the most dramatic changes: The Credit Bureau Reporting will be Account Status Code 13 (paid or closed account/zero balance) or 65 (account paid in full/a foreclosure was started), as applicable.
With these updates, a homeowner can be current on their mortgage, qualify for HAFA, continue to make their payments, and execute a short sale with minimum impact on their credit!