New Home Affordable Foreclosure Alternatives Program Rules Impact Cincinnati Real Estate Market

The Federal Government has recently implemented another program designed to assist home owners in financial trouble. The government has already rolled out the Making Homes Affordable Modification Program (HAMP) designed to help homeowners modify their mortgages.

The new Home Affordable Foreclosure Alternatives Program (HAFA) goes one step further. In the case where someone has already had a loan modification and is still not able to pay their modified mortgage. The HAFA program essentially pre-approves participants for ‘short sales’, fast-tracking them to sell their home and settle their debt with their creditors.. The program is efficient because it already uses financial hardship information collected by HAMP.

This program is going to impact the Cincinnati real estate market by helping to shit the home inventory from foreclosures to short-sales, The larger impact could be a stabilizing effect on local home prices. While short sales tend to sell below market, they tend to sell for higher amounts than foreclosures.  Below are some details on the HAFA program. For more visit the article posted on

* Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds and acceptable closing costs).

* Requires borrowers to be fully released from future liability for the first mortgage debt and, if the subordinate lien holders receive an incentive under HAFA, those debts as well (no cash contribution, promissory note, or deficiency judgment is allowed).

* Provides financial incentives: $3,000 for borrower relocation assistance; $1,500 for mortgage servicers to cover administrative and processing costs; and up to a $2,000 match for mortgage investors for allowing a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders (up to 6 percent of the remaining balance of each junior lien).

* Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.
The program sunsets on December 31, 2012.

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