What is HAFA?
Beginning April 5, 2010, the Home Affordable Foreclosure Alternatives (HAFA) program will provide another option for MN homeowners who are unable to keep their homes through the existing Home Affordable Modification Program (HAMP).

The Home Affordable Modification Program (HAMP) allows some homeowners the option to have their mortgage modified to more affordable terms.  Loans can be modified only once under the program.  You may be eligible for a Home Affordable Modification if you meet some of the eligibility requirements below.

• My loan was originated on or before Jan. 1, 2009
• I have a first mortgage on my home with an unpaid principal balance of no more than $729,750. (Higher limits are allowed if your home has 2-4 units.)
• I can fully document my income and sign the IRS 4506-T, provide my two most recent paystubs and most recent tax return.
• I can sign an affidavit of financial hardship, which may include a job loss or decrease in income, increase in monthly adjustable-rate mortgage payment, medical issues, etc.
• I understand my property owner occupancy status will be verified through a borrower credit report and other documentation (investor-owned, vacant, or condemned properties are not allowed.)

To get started, contact the customer service number on your monthly mortgage statement.  Only your loan servicer can process a loan modification or foreclosure alternative for you.

The Home Affordable Foreclosure Alternatives Program (HAFA) provides lenders, mortgage investors and mortgage servicers more incentives to offer troubled borrowers short sales or deed-in-lieu (DIL) to avoid foreclosure. Under the new program, borrowers will earn a "relocation incentive" and servicers will get money for handling a short sale.

These options may be available for Minnesota homeowners who: 

1. Do not qualify for a trial mortgage modification under the Making Home Affordable Program (HAMP)
2. Do not successfully complete the trial period for their (HAMP) modification 
3. Miss at least two consecutive payments during their modification period
4. Request a short sale or deed-in-lieu of foreclosure

Program Features:

• Program goes into effect April 5, 2010 and ends Dec. 31, 2012.
• Allows the borrower to receive pre-approved short sale terms prior to the property listings.
• Prohibits the servicer from requiring a reduction in the real estate commission (not to exceed 6 percent) agreed upon in the listing agreement.
• Requires that the borrower be fully released from future liability for the debt.
• Provides financial incentives to borrowers, servicers, and investors:
  • $3,000 for borrower relocation assistance
  • $1,000 for servicers to cover administrative and processing costs
  • Up to $1,000 for investors for allowing a total of up to $3,000 in short sales proceeds to be distributed to subordinate lien holders

Short Sales
The seller is asking their lender(s) to agree to take less than the amount owed on the home.  It’s considered a short sale when the sale price is insufficient to pay off the total mortgage(s) and costs of the sale.

Deed-in-Lieu of Foreclosure
Generally, if the borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a deed-in-lieu of foreclosure in which the borrower voluntarily transfers ownership of the property to the servicer (title must be free and clear of mortgages, liens, and encumbrances).

Mortgage servicers and investors observe their own guidelines under the Federal requirements to determine how to implement the program. For more information about your options, contact your mortgage servicer. If you have questions about the program, or want guidance about how these options may impact your personal situation, you may wish to speak to a HUD-approved housing counselor for free.

Source: http://makinghomeaffordable.gov/hafa.html