My loan modification was denied….Where do I go from here?

When a homeowner applies for help from the Home Affordable Modification Program (HAMP), not everyone succeeds with the program.  Sometimes the lender is unable to approve the modification or the borrower will decline the terms of the loan modification.  There are even circumstances where a homeowner is approved for the modification, accepts the terms of the modification but fails to complete the program for varying reasons.  Normally, these homeowners would be headed for foreclosure but there is a program named Home Affordable Foreclosure Alternatives (HAFA) that can help.

HAFA offers homeowners some alternatives to foreclosure.  If they have or want to find a borrower for their home, they can request approval for a short sale with pre-approved short sale terms and minimum acceptable net proceeds.  The other option is to request approval for a deed-in-lieu.  If a borrower applies for help with one of the HAFA programs they do not have to worry about restating their financial hardship.  Since these programs complement one another the HAFA program already has the financial and hardship information from the HAMP application.

Under the terms of the HAFA program, lenders must release a borrower from all future liability for the first mortgage debt.  The lender may not ask the borrower for cash, a promissory note or a deficiency judgment.  

The HAFA program has standardized documents, procedures, time frames and deadlines thus streamlining the process which makes the process easier for both borrowers and lenders.

In addition, the HAFA program offers incentives for the homeowner and the participating lender.  Borrowers can receive $1,500 in relocation assistance and the lender may receive up to $1,000 to cover administrative costs.  The lender on the first mortgage can also receive proceeds to allow payment to subordinate lien holders (2nd mortgages/HELOC).

Participation in the HAFA program puts the foreclosure process on hold.  The lender may initiate the foreclosure process but if the homeowner is in the middle of the HAFA application process or there is an approved short sale or deed-in-lieu on the table, the lender may not complete the foreclosure process.

HAFA Qualification Requirements

A LOAN MEETS ELIGIBILITY FOR HAFA IF ALL OF THE FOLLOWING ARE TRUE:

1. The mortgage was the principal residence of the homeowner.
2. The mortgage was a first lien and originated before January 1, 2009.
3. The mortgage is delinquent or a default is foreseeable.
4. The unpaid principal balance of the mortgage is no more than $729,750 for a single family residence, $934,200 for a dual-unit property, $1,129,250 for a three-unit property or $1,403,400 for a four unit residence.
5. The total monthly payment on the mortgage (including principal, interest, property taxes, hazard and flood insurance, condominium association dues, homeowner’s association dues and any escrow payments subject to repayment) is more than 31% fo the gross income of all borrowers on that mortgage.
6. The loan servicer has considered the homeowner for a HAMP loan modification and one of the following applies:

• The borrower does not qualify for a Trial Period Plan.
• The borrower does not successfully complete a Trial Period Plan.
• The borrower is delinquent on a HAMP modification by missing at least two consecutive payments.
• The borrower requests a short sale or deed-in-lieu.

HAMP eligible homeowners must be considered for HAFA within 30 days of the termination of the HAMP agreement or the request of a short sale/deed-in-lieu.

Every potentially eligible borrower must be considered for HAFA before the loan is referred to foreclosure.  Keep in mind that all lenders reserve the right to accept on deny HAFA applications based on factors such as:

1. Timing of pending foreclosure actions
2. Borrower motivation/cooperation
3. Severity of loss involved
4. Local market conditions

As you move through these processes remember…TIME IS OF THE ESSENCE!  BE PROACTIVE, SOLICIT HELP FROM A REAL ESTATE PROFESSIONAL AT THE FIRST SIGN OF A DEFAULT.  THE SOONER YOU ADDRESS THE ISSUE, THE MORE OPTIONS YOU WILL HAVE.

For additional information contact:

Tammie Seldon

Atlanta Property Shoppe at Keller Williams Realty

Office: 404-419-3696

Fax: 678-668-8060

Email: Tammie@AtlantaPropertyShoppe.com