Home Affordable Foreclorsure Alternatives Program (HAFA) Consideration Explained

The Home Affordable Foreclosure Alternatives Program (HAFA) was designed as a specific part of the "Making Home Affordable" initiative. This initiative specifically addresses home owners who face challenges with their mortgages as a result of the market crash in 2007. From April 2010 to December 2012, the HAFA program will help individuals facing foreclosure avoid the problem by opting for a short sale or deed in lieu of foreclosure transaction. 

Who Qualifies for HAFA?

To be eligible for the HAFA program, a borrower must qualify for the Home Affordable Modification Program (HAMP). This is the parent program to HAFA. It allows individuals who are having difficulty paying their mortgage to refinance through the Department of Housing and Urban Development. This means the borrower must:

  • Live in the home as a principal residence
  • Have a loan that originated prior to January 1
  • Have less than $729,750 in mortgage debt
  • Make payments exceeding 31 percent of the borrower's income

These are the basic HAMP requirements, but a borrower must further qualify for the HAFA program beyond these regulations. To be eligible for a short sale or deed in lieu of foreclosure option through HAFA, the borrower must miss a payment during the HAMP process or have a specific challenge that would render him or her unable to use the HAMP option.

Why Use HAFA?

Saving yourself from foreclosure means saving yourself from a lifetime of damaged credit. Even though a foreclosure technically leaves your credit report after 10 to 15 years depending on your state, the reality is a potential lender can often locate the information on you through a background check or other means. As a result, a foreclosure can result in the inability to get a loan in the future. For a limited period of time, the federal government is offering assistance to help you take this critical step to protect your financial future. If you qualify, you should consider using the program versus the cost of allowing a foreclosure to occur. You will likely find the HAFA program challenging to navigate but well worth the hassle.

What Does HAFA Do?

If you qualify and decide to use the program, you are eligible for a short sale or deed in lieu of foreclosure opportunity. Many lenders will offer these options regardless of whether or not you qualify for the HAFA program. However, HAFA provides key assistance throughout the process of exiting a mortgage. For example, a lender participating in the HAFA program will work to pre-approve your short sale. Then, when you receive an offer on your property, you can move forward without delay to get out of your damaged mortgage. In a deed in lieu option, you are able to simply hand over your home to the lender and walk away without a foreclosure on record. The key assistance here may be the tax forgiveness you receive. As a participant in the HAFA program, you will qualify for mortgage forgiveness debt relief option on your taxes. This means you will not have to count the forgiven debt as income, saving you from taxes on your forgiven mortgage.