How Can Homeowners Avoid Foreclosure with Government Help?

Homeowners who can't afford their monthly mortgage payments on but want to avoid a foreclosure, can speak to a HUD-approved housing counselor and find out if they are eligible for a short-sale or a deed-in-lieu of foreclosure under the Home Affordable Foreclosure Alternatives (HAFA) program.

This new initiative of the Obama administration has been officially activated on April 5, 2010.

Who can qualify for short- sale and deed-in lieu under HAFA? The alternative options to avoid foreclosure are available to homeowners who had qualified but Home Affordable Modification Program (HAMP) but could not succeed in getting the loan modified for various reasons or to those who request a short sale or deed-in-lieu of foreclosure. To qualify for help under HAFA, home owners must meet the eligibility criteria of HAMP. The criteria are: *The home must be the primary residence.

*Homeowners must be delinquent on monthly payments on mortgage due to financial hardship.

*The amount owed on first mortgage must not exceed $729,750.

*First mortgage monthly payments should be more than 31% of the current gross income.

What are the advantages of a short sale?

In a short sale, the homeowner is allowed by the lender to sell the property at a price lower than the total amount due on the first mortgage and accept the sale proceeds to release the lien. The lender forgives the remaining debt amount. An advantage of HAFA short sale is that the procedure takes less time as compared to a normal short sale. The lender specifies to the borrower an approximate amount that he will accept in short sale. The borrower can accordingly search for prospective buyers.

What is deed-in-lieu of foreclosure?

If a borrower is not successful in selling the property, his lender may consider a deed-in-lieu of foreclosure. With a deed-in-lieu, the borrower voluntarily gives the deed of property to the lender as payment in full provided the title is free of liens. Under HAFA, borrowers get $3,000 as relocation cost. The Home Affordable Foreclosure Alternatives also provide financial incentives to lenders and investors. Lenders receive $1,000 as processing and administrative costs. For allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders, investors get incentives of up to $1,000. Hence HAFA is not only attractive for borrowers who can no longer afford their monthly payments on mortgage but also for lenders and investors.

For more information, visit: http://makinghomeaffordable.gov/hafa.html