Pitfalls of the HAFA Short Sale Program

The Home Affordable Foreclosure Alternative plan is a federally funded plan designed to assist homeowners who are delinquent on their payments and did not qualified for the Home Affordable Modification Plan (HAMP). 

The following are pitfalls of the HAFA program: 
* Lenders don’t have to approve any of the HAFA programs. 
* The banks still are not set up for the numbers of homeowners that are trying to qualify for either the Loan Modification or Short Sale program. There are seven plus million homes right now across the nation are in default and the number is expected to grow. 
*The downfall of HAFA can be the Mortgage  and the HELOC loans that were taken out on many homes after the original closing of the property. These two companies are reluctant to discounting their loans and may reject the short sale all together! 
* Sellers may have to continue to pay a portion of their mortgage payment. They will be required to pay, during the term of the Short Sale Agreement (SSA), an amount that must not exceed 31% of the borrower’s gross monthly income. Sellers who miss payments will be in default of the agreement and a DIL can be immediately pursued and enforced! So if the homeowner goes through a tough period during the short sale process, they may be foreclosed upon and evicted immediately. 
* Once the property is sold, the new homeowner must hold the property for 90 days before reselling, which may take many  out of the buying field. 

Perhaps the biggest obstacle is the assumption that a homeowner will be able to effectively negotiate with junior lien holders, repair or keep up the house, find a new place to live, and sell the property within 120 days. Many distressed homeowners facing foreclosure would rather give up, walk away from the property, or have a short sale investors take on all the paperwork and negotiating responsibilities so they may move on with their lives. 

In summary, there are some good points to the HAFA program that will benefit some homeowners. But as HAMP and other government run programs have failed to provide assistance to the majority of those it was designed to help, given the number of detriments to the program, HAFA may not fare any better.