Is HAFA Helping Short Sales?

Is the Treasury Department’s Home Affordable Foreclosure Alternatives (HAFA) program helping short sales? It was introduced to help borrowers who couldn’t qualify for the Home Affordable Modification Program (HEMP) complete a short sale (as well as expedite the process…which is an oxymoron in and of itself; the government helping private enterprise be more efficient, ha!).

Now, after 15 months, the $4.1 Billion program has disbursed $9.5 million and accounted for only 8,541 short sales. To put that in perspective, during that same time frame, nearly 500,000 short sales were completed across the country. Meaning, a whooping 0.01% of short sales were completed through the HAFA program.

Why so few HAFA short sales?[like-lock]

  1. Lender Lack of Participation: Lenders are not allowed to collect on loan balances when short sales are handled through the HAFA program.
  2. Borrower Lack of Participation: In order to qualify, borrowers must have lived in their home for the past 12 months (no investment properties), have documented and qualifying financial hardship (no strategic defaults), a first mortgage less than $729,750 obtained before January 1, 2009 (sorry California) as well as a host of other requirements.

Ironically, both Lenders and Borrowers stand to gain financially from HAFA short sales. Lenders receive $1,500 for participation in the program and borrowers can receive up to $3,000. A testament to it’s effectiveness…it’s having trouble paying people to participate!

The program is due to expire at the end of next year. Director of policy Laurie Maggiano says the “complex machine” of HAFA will take time to change, but that change is finally, “beginning to happen”.

What do you think?

Is this a good use of our tax dollars? Paying $4,500 for each completed short sale transaction?

Does it need policy reform, or should it be canceled all together?

Is HAFA helping with short sales?[/like-lock]