The WSJ Real Estate blog reports that the government’s HAFA (Home Affordable Foreclosure Alternatives) program could be even less successful than HAMP (Home Affordable Modification Program) as less than 350 deals have gone through in about five months.
It may be too early to pass judgment on this effort to avoid foreclosures by providing incentives to the involved parties to do a short sale instead but, given the government’s track record in providing assistance to a very troubled housing market, probably not.
Many real-estate agents say banks have largely ignored the program and that they are applying it unevenly. “Banks are initiating the HAFA transaction and then after three weeks they say, ‘Naw, sorry, you didn’t qualify,’” says Greg Markov, a Phoenix real-estate agent. “That three weeks is a huge pain. You wasted all this time.”
Industry officials, meanwhile, say that HAFA has been hindered by extensive documentation requirements and restrictive qualification guidelines. A homeowner that’s already relocated isn’t HAFA eligible, for example, and neither are borrowers that apply within 60 days of a foreclosure date.
The program is also voluntary, which may limit participation from second-lien holders and mortgage insurance companies that see a financial reason to avoid a short sale that requires them to forgo the opportunity to seek deficiencies against borrowers.
During our six month long short sale ordeal (see here for full details), HAFA cost us at least a month of that time as the bank put our “file” into the HAFA process when the listing agent knew from the very beginning that the second lien holder was not going to participate in that kind of a deal. Anyone trying to buy a short sale property (particularly with a listing agent who is new to this sort of thing) is advised to ask HAFA questions up front.