Fannie & Freddie Get On Board with HAFA: Real Estate Information for Short Sales & Foreclosures

It's finally here...  I knew this was going to be coming, and now it's here!

NEW HAFA GUIDELINES FOR Fannie Mae and Freddie Mac

June 1, 2010: Both Fannie Mae and Freddie Mac have established guidelines for participating in the Treasury Department's Home Affordable Foreclosure Alternatives Program (HAFA).

The new process takes the place of the HAFA guidelines for non-GSE mortgages. Mortgage servicers are required to adhere to these policies beginning on August 1st.  While these policies are pretty much the same as the current HAFA policies for non-GSE lenders and mortgages, both Freddie and Fannie have made some important changes.

To be considered for the non-GSE (not Freddie Mac or Fannie Mae) HAFA rules, the borrower has to be behind on their payments or a deficiency must be a reasonably foreseeable event in the future.

Under the new Freddie Mac policies, a homeowner/borrower must be more than 60 days delinquent AND have cash reserves of less than the either $5,000 or 3X the monthly payment (whichever is greater).

However, the Fannie Mae policy allows borrowers to be at imminent risk of default, but not presently in default.  The Fannie Mae version also prevents borrowers from taking part in the HAFA program if they have the ability to continue paying their mortgage.  Yes, there have been borrowers who claim to be in what is known as "stretegic default" where they have the money to pay their mortgage with their unencumbered assets or large cash reserves that exceed 3 times the monthly mortgage payment or they have surplus income.

Freddie Mac and Fannie Mae will ensure that the contracted real estate commission (the amount in the listing agreement) is honored, but only up to 6 percent.

They also provide incentives for the servicer (bank) approving the short sale or Deed In Lieu.  The servicer/lender will receive $2,200 for a short sale and $1,500 for a deed-in-lieu of foreclosure (DIL).  The policy for non-GSE mortgages provides $1,500 to the servicer/lender for both situations.

With the GSEs, the subordinate lien holders (in priority order) can be paid up to 6% of the unpaid portion of its mortgage/loan, up to a cap of $6,000. That's the same as in the non-GSE program.

In keeping with the previous version of the HAFA program, Fannie and Freddie policies do not allow the subordinate lien holders to hold-back or require contributions from the real estate agent or homeowner/borrower as a condition for releasing its lien and even more importantly for releasing the borrower from personal liability.