TopMortgage Compliance Update (1)
  June 1, 2010
                                        Fannie: Foreclosure Alternatives Program  

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Overview

Fannie Mae announced today the introduction of its Home Affordable Foreclosure Alternatives Program (HAFA). In a previous Announcement, entitled Home Affordable Modification Program - Program Update and Resolution of Active Trial Modifications, Fannie provided criteria for eligibility, underwriting, and servicing requirements for the Home Affordable Modification Program (HAMP).

HAFA is part of HAMP and provides financial incentives to servicers and borrowers who utilize a short sale (i.e., "preforeclosure sale")
or deed-in-lieu of foreclosure (i.e., DIL) to avoid foreclosure on an eligible loan under HAMP.

One significant purpose of these foreclosure alternatives is to reduce the need for potentially lengthy and expensive foreclosure proceedings, while also helping to preserve the condition and value of the property by minimizing the time a property is vacant and subject to vandalism and deterioration.

Essentially, the HAFA program is designed to mitigate the impact of foreclosures on borrowers who are eligible for a loan modification under the Home Affordable Modification Program (HAMP) but were unsuccessful in obtaining one.



Effective Date: August 1, 2010
Highlights

Simplification of Short Sales and DIL Options

  • Complements HAMP by providing viable alternatives for borrowers who are HAMP eligible (including borrowers facing imminent default)
  • Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis
  • Allows the borrower to receive pre-approved short sale terms prior to the property listing
  • Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement
  • Requires that borrowers be fully released from future liability for the debt
  • Uses standard processes, documents, and timeframes
  • Provides financial incentives to borrowers and servicers
Guidance to Servicers
  • Effective Dates
  • Foreclosure Prevention Alternatives
  • Eligibility
  • Standard Documents
  • Borrower Solicitation and Response
  • Determining the Estimated Sales Price of the Property
  • Review of Title
  • Short Sale Process
  • DIL Offer
  • Use of Electronic Records
  • Temporary Suspension of Foreclosure
  • Payments Pending Sale or DIL
  • Release of First Mortgage Lien
  • Mortgage Insurance
  • Reporting Requirements
  • Fees and Incentive Compensation
  • Record Retention

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Introduction of Fannie Mae's Home Affordable Foreclosure Alternatives Program

SVC-2010-07 (06/01/10)



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