Freddie Mac helps finance about one in four of all home mortgages. The agency does this by buying the mortgage from your local lender, which helps the lender to make additional mortgages to other people. If your mortgage is owned by Freddie Mac and you're having difficulty making your monthly payments, then the Home Affordable Foreclosure Alternatives program, or HAFA, may be able to assist you.
The HAFA program is designed to prevent foreclosures. It does this by helping you to do a short sale of your home, which allows you to sell your home for less than the amount of your mortgage balance. While you can try to do a short sale on your own, HAFA provides a great deal of assistance and benefits, if you qualify, that you would not get on your own.
HAFA is only available to you if you have first been disqualified from a loan modification program. Your home must be your primary and actual residence and you must occupy the home throughout the whole process. The mortgage must have started before January 1, 2009. Your payments must be at least 60 days behind and you need to show financial hardship. This means your available cash is no more than $5,000 or three times the monthly mortgage payment, whichever is greater.
A key feature of HAFA is that the mortgage company that services your loan must allow you to participate if you're eligible. The mortgage company is required to pre-approve the sales price and to expedite the short-sale process. Freddie Mac requires lenders to proactively use HAFA prior to any foreclosure action being taken. HAFA rules do not permit you to make any monetary payments to complete the short sale. Very importantly, you will not be held legally responsible for the mortgage balance remaining after the sale of your home.
You may still use HAFA even if your mortgage has been put into the foreclosure process or if you are in an active bankruptcy filing. After the sale of your home through HAFA, you will be eligible to receive monetary assistance to move. If your home does not sell, you may be eligible for a deed in lieu of foreclosure, which allows you to legally turn over your home to Freddie Mac and avoid foreclosure. As of publication, the HAFA program is set to run through the end of 2013.
Kerry Zias has been a strategic business consultant and college instructor of business administration courses since 1990. He has taught courses and performed professional consulting work in the areas of marketing, management, business start-ups, entrepreneurship, real estate, sales psychology and performance, business communications, business law and political/governmental relations. Zias holds a Master of Business Administration in marketing from National University.