Government Program Provides Alternatives to Foreclosure

The U.S. Treasury Department is now offering help for America's homeowners who are on the brink of foreclosure on their home. Effective April 5, 2010, the Home Affordable Foreclosure Alternatives Program (HAFA) provides financial incentives to homeowners and lenders who utilize a short sale or a deed-in-lieu to avoid a foreclosure.
 
A short sale is a sale of a real estate property in which the proceeds are less than the balance owed on the property's mortgage. In a typical short sale, a borrower cannot pay the mortgage on their home, but the lender decides that selling the property at a moderate loss is more advantageous than allowing a foreclosure. Both the bank and the homeowner usually agree to a short sale so the bank can escape hefty foreclosure fees and the borrower can dodge a poor credit rating.
 
A deed-in-lieu (DIL) of a foreclosure is where a borrower turns over interest in the property to the lender to satisfy a mortgage loan that is in default, thus avoiding foreclosure. The benefits are that the borrower is released from personal indebtedness with less impact on his or her credit and little public exposure.
 
These foreclosure alternatives help circumvent potentially lengthy and costly foreclosure proceedings. With either the HAFA short sale or DIL, the lender cannot require a cash contribution or promissory note from the borrower and must forfeit the right to pursue a deficiency judgment against the borrower by doubling back and suing the homeowner for the loss.
 
Both alternatives to foreclosure help maintain the property's condition and value by minimizing the time a property is unoccupied and subject to vandalism and deterioration. These options generally are an improvement over a foreclosure sale for borrowers, investors and communities.
 
The HAFA rules may not apply to every homeowner considering foreclosing on their mortgage. Consult a Keller Williams Realtor (r) to find out what alternative is the best for your situation.