1. Home Affordable Foreclosure Alternatives (“HAFA”)
Eligibility and Implementation

2. Home Affordable Foreclosure Alternative (“HAFA”) Eligibility and Implementation
Implementation April 5, 2010
Borrower must meet eligibility criteria for HAMP
First lien originated prior to 2009
Delinquent or default reasonably foreseeable
Unpaid principal no more that $729,750 (SFR higher for 2-4 units)
Borrower total payments exceed 31% of gross income
Program subject to lender guidelines
Severity of loss, local market conditions, timing of pending foreclosure, borrower motivation and cooperation
Short Sale Agreement (“SSA”) sent to borrower if eligible
Informs as to process
At time of or prior to listing
Request for Approval of Short Sale (“RASS”)
Sent after borrower contracts to sell
Borrower submits for approval within 3 business days

3. HAFA Improving the Short Sale Process
Complements HAMP
Viable alternative for borrowers who are HAMP eligible but unable to keep their home
Uses hardship information already collected
Allows for pre-approved short terms prior to listing (including minimum net and costs)
Requires full release from future liability for first lien
no cash, note or deficiency allowed
Junior liens accepting HAFA must also release borrower from future liability
May not require contributions from real estate agent, borrower/seller as a condition
Standard process, documents and timeframes/deadlines
Provides financial incentives
$3,000 for borrower relocating assistance
$1,500 for servicers to cover administrative costs
$Up to a $2,000 match for investors (senior) for allowing a total of up to $6,000
in short sale proceeds to be distributed to subordinate lien holders
(up to 6% cap per lien)

4. HAFA Timelines Within 3 business days of receipt of an executed offer
Borrower or listing agent must submit the RASS to servicer
Including (i) copy of sale contract and all addenda; (ii)buyer documentation of funds or pre-approval letter; and (iii) all information on status of subordinate liens and/or negotiations with lien holders
Within 10 business days after the servicer receives the RASS and requires attachments
Servicer must approve or deny the request and;
Provide borrower with reasons for denial
Servicer may require reasonable closing date following approval of RASS
Not sooner than 45 days from the date of the sales contract unless borrower agrees
Servicer to follow local and state law with respect to release of its first mortgage lien after receipt of proceeds
If no deadline required servicer must release within 30 business days
Investor must waive rights to seek deficiency judgment
May not require a promissory note for any deficiency

5. HAFA Alternative Timelines
Based on servicers written policy every eligible borrower must be considered
Servicers must consider eligible borrowers within 30 days of the borrower doing at least one of the following:
Does not qualify for HAMP
Does not complete the trial period plan
Misses two consecutive payments
Requests a DIL or short sale
If servicer has not already discussed a DIL or short sale
Written notice must be given
Borrower has 14 calendar days to respond
Orally or in writing
Borrowers failure to respond ends servicers duty to extend a HAFA offer
If borrower appears to qualify for HAFA
Servicer sends SSA which must be signed and returned to servicer within 14 calendar days
The SSA must give borrower 120 days to sell
Extensions are permitted up to 12 months (if mutually agreed)

6. HAFA Rules on Commission
The SSA specifies the amount of commission to be paid determined by the sevicer
Servicer transmits to SSA to the borrower for consideration of terms
SSA requires borrower to list with a real estate professional/broker (“agent”)
Borrower and prospective real estate agent may negotiate the commission with the servicer
If borrower and agent agree to participate with servicer, both must sign the SSA as agreement to the terms
NAR is seeking member comments on any HAFA omission related issues
The rule is different if the borrower submits sales contract to the servicer for approval before a SSA is executed
An Alternative Request for Short Sale is submitted along with the offer
The commission in this case is the amount that was negotiated in the listing agreement
Not to exceed 6%
This policy recognizes the agent has already marketed
property and obtained a contract thus it is not appropriate to reduce the commission below the previously negotiated amount

7. HAFA Rules on Commission
Important notes:
At the urging of NAR, the Treasury Department rescinded the policy that authorized the servicer to reduce commission by a specified amount to pay a vendor/negotiator hired to assist agent
Neither buyers or seller may earn a commission in connection the short sale, even if they are licensed agents. No side deals to receive commission are permitted

8. HAFA Required Clauses Cancellation clause
Seller may cancel without notice and without paying commission if property is conveyed to mortgage insurer or mortgage holder
Contingency clause
Sale is subject to written agreement of sales terms by mortgage holder or mortgage insurer

9. HAFA Incentive Payments
Borrower Relocation Incentive
$3,000 paid at closing
Servicer Incentive
$1,500 for administrative costs for short sale or DIL completed under HAFA
Investors may provide additional incentives
Investor Reimbursement for Subordinate Lien Releases
Up to $2,000 in exchange for allowing up to $6,000 in short sale proceed to be paid to subordinate lien holders (up to 6% for any single lien, in order of priority not to exceed $6, aggregate cap)
Must agree not to pursue deficiency

10. HAFA Additional Contributions & Like Treatment of Borrowers
Junior lien holder are prohibited from seeking additional contributions from agent or borrower a condition of releasing lien and waiving deficiency
Pursuant to Treasury Department guidelines updated March 26, 2010
Treating similarly situated borrowers the same is required
However not all borrowers will qualify for a short sale or DIL
Participating servicers must have written policy
Consistent with investor guidelines
Describing basis for decisions
May include factors such as severity of loss,
local market conditions, timing of pending
foreclosure and borrower motivation and
cooperation

11. HAFA and Foreclosure
Servicer may initiate but not complete a foreclosure sale
While determining borrowers eligibility for HAMP or HAFA
Awaiting the return of SSA in the 14 day deadline
During the term of a fully executed SSA while borrower tries to sell
Pending the transfer of ownership based on an approved contract per the RASS or Alternative RASS
Pending transfer of ownership via a DIL by the date specified in SSA or DIL Agreement

12. HAFA and the DIL Subject to investor requirements
Servicers may accept a DIL under HAFA
Requires full release from debt
Waiver of all claims
Borrower must vacate property by a specific date
Leave in broom clean condition
Deliver clear and marketable title
The same monetary incentives are available

13. More on HAFA Transaction must be arms length
Borrower cannot list the property with or sell to a relative or anyone with whom they have a personal or business relationship
Amount of debt forgiven may be treated as income for tax purposes
Possibly exempt under Mortgage Debt Relief Bill of 2008 (expires 2012)
Servicer will report as settled for less than full
Credit score will be negatively impacted
Buyers may not reconvey the property within 90 days after closing
Program ends
SSA must be executed and returned to servicer no later than

14. HAFA Prohibitions Rebates from Realtors®
Under HAFA no rebates are permitted the Request for Approval of Short Sale (“RASS”) states neither borrower nor buyer will receive any funds or commissions from sale of property.
Arm-length Transaction
Sellers who are real estate licensees may not list with their broker nor anyone with whom they have a close business relationship
Anti-fraud provision
Avoids risk of seller profiting
Payments to Subordinate Lien holders
6% or $6,000 is the limit to pay off subordinate lien holders
It is a “hard cap” regardless of who pays the money

15. That’s it for now! Be Careful Out There 15