subject: HAFA Short Sale Eligibility Requirements [print this page] HAFA Short Sale Eligibility Requirements HAFA Short Sale Eligibility Requirements
Short sale eligibility varies by lender and often leaves homeowners confused about available options. Borrowers who can no longer afford to maintain loan installments or owe more than their home is worth may find short selling the best available option.
The best source of short sale eligibility information is through the servicing lender. When homeowners become delinquent with loan payments their account is turned over to a bank loss mitigator. When banks issue a Notice of Default the name of the loss mitigator assigned to manage the account is usually listed at the bottom of the letter.
Borrowers who have not entered into default, but struggling to make their payments might be eligible for short selling their property. A good source for evaluating mortgage loans and understanding the short sale process is Making Home Affordable.
The MHA website presents information about each of their programs, along with eligibility criteria. Available programs include Home Affordable Loan Modification (HAMP), Home Affordable Refinance Program (HARP) and Home Affordable Foreclosure Alternatives (HAFA).
Real estate short sales fall under HAFA. This option is offered to borrowers whose loans originated with Fannie Mae, Freddie Mac, or any of the lenders participating in the MHA program.
The first step in the application of MHA real estate short sale is to determine if the servicing lender participates in the program. If so, mortgagors must meet the following five eligibility criteria.
1. The house is used as the primary residence.
2. The remainder of the first mortgage does not exceed $729,759.
3. Creation date of the first mortgage is on or before January 1, 2009.
4. Monthly payments for the first mortgage exceed 31-percent of mortgagor's pre-tax income.
5. Borrowers are experiencing severe financial difficulties.
Unfortunately, there are no guarantees participating lenders will accept applications for short selling, even if borrowers meet all requirements. MHA applicants must first undergo financial audit to determine if other MHA programs are more appropriate.
Banks may determine homeowners qualify for loan modification or mortgage refinance. Oftentimes, these options reduce payments enough that borrowers can remain in their home and avoid foreclosure. Depending on the program, borrowers may be able to save $500 to $1000 per month.
If short selling is the best option for borrowers, banks will provide borrowers with required documents. Borrowers are required to provide a short sale hardship letter outlining events which led to financial difficulties.
Mortgage experts recommend handwriting letters that include a timeline of events leading to financial distress, along with interventions taken to reduce hardships.
Homeowners facing foreclosure often believe banks have no compassion and are only interested in repossessing their home. While this may be the case with some lenders, banks participating in MHA are concerned about helping borrowers. Qualified applicants who apply for help under MHA are given the opportunity to either reduce monthly payments or enter into HAFA programs.
Homeowners who are unable to work out feasible plans with their lender may find it advantageous to obtain housing counseling through the Department of Housing and Urban Development.
HUD has received over $7 million from the U.S. government to provide housing counseling to homeowners in need of mortgage assistance. HUD provides complimentary counseling and can assist borrowers with submitting mortgage refinance and loan modification applications.
Borrowers that do not qualify for short sale eligibility may qualify for deed in lieu of foreclosure instead. This option requires homeowners to give their house back to the bank under MHA's 'Exit Gracefully' program. Qualified borrowers can receive up to $3000 in relocation assistance money under HAFA programs. Details of MHA programs are presented at MakingHomeAffordable.gov.
