Fannie Mae New HAFA Short Sale Program

After a long wait, Fannie Mae announced it’s version of HAFA program for homeowners to assist in difficulties to avoid foreclosure. This program will take effect from August 1, 2010

Homeowners will get $3,000 for moving expenses when they do short sale. Here are the details of new Fannie Mae HAFA program:

Fannie Mae (FNM: 0.93 -5.10%) announced its version of the Making Home Affordable Foreclosure Alternatives (HAFA) program Tuesday, implementing the program for all conventional mortgages that are held in Fannie’s portfolio, that are part of an mortgage-backed security (MBS) pool with a special servicing option, or that are part of a shared-risk MBS pool for which Fannie Mae markets the acquired property.

The Fannie Mae program takes effect August 1, 2010 and is designed to mitigate the impact of foreclosures on borrowers who are eligible for a loan modification under the Home Affordable Modification Program (HAMP) but were unsuccessful in obtaining one, Fannie said. Like theTreasury Department’s HAFA program, servicers cannot consider a borrower for HAFA until the borrower is evaluated and eliminated from eligibility for a Making Home Affordable Modification Program (HAMP) workout plan.

Also like the Treasury program, Fannie Mae will offer servicers cash incentives for completed HAFA transactions, $2,200 for short sales and $1,200 for deed-in-lieu of foreclosure agreements. Borrowers are also eligible for $3,000 in incentives.

That’s more than in the Treasury’s HAFA program, where servicers are eligible for $1,000 and the borrower gets $1,500. In the Treasury HAFA, the investor is also eligible for a $1,000 incentive.

Participating servicers will be required to report on their Fannie Mae HAFA activities to both Fannie and the Treasury and the program sunsets on December 31, 2012.

After announcing the program in October 2009, Treasury’s HAFA program began in April. The Fannie Mae HAFA program is the latest in a string of programs designed to help borrowers avoid foreclosure. In addition to HAFA and HAMP workouts, Fannie Mae is letting some distressed borrowers stay in their homes as renters, under the deed for lease (D4L) program.

Under D4L, the homeowner-turned-renter is required to pay fair market rent to stay in their home for up to 12 months. The renter must have enough income to sustain a 31% income-to-rent ratio and rental payments are not subsidized by Fannie Mae, but could include renters eligible for Section 8 payments.

Also, in March 2010, Fannie Mae instructed its servicers to consider an “alternative modifications” for all mortgages that did not qualify for a permanent conversion under HAMP. That “Alt Mod” program, which sunsets on August 31, 2010, is similar to HAFA.

Thanks to Tim and Julie for this update information on their blog !

If you are in bay area and would like more information whether you qualify for short sale or how short sale can benefit you then please call me at 510-366-9405.