Home Affordable Foreclosure Alternatives

Mortgage and Borrower Eligibility

The following mortgages are eligible for HAFA:

• First-lien mortgages, owned, guaranteed, or securitized by Freddie Mac that were originated on or before January 1, 2009.
• Eligible properties are single-family 1-4 unit primary residences, including condos, Guide-eligible manufactured homes, and negotiated conforming jumbos.
• Mortgaged property is not abandoned, condemned, or vacant (without an applicable exception).

Borrowers may be eligible for this initiative if they meet the following requirements:

• Borrowers must be more than 60 days delinquent and have cash reserves less than the greater of $5,000 or three times their current monthly mortgage payment.
• Borrowers must have first been considered for a HAMP modification and then for other Freddie Mac home retention options under Guide Chapter B65, but was either ineligible, did not complete, or declined the modification.
• Borrowers may be in foreclosure, in pending litigation involving the mortgage, or in active bankruptcy.
• Borrowers must be able to convey a clear, marketable title to the mortgaged property.

Other mortgage and borrower eligibility requirements apply as noted in Guide Section D65.3.

Borrower Solicitation and Documentation

Solicitiation Requirements

As part of our general HAFA solicitation requirements, Servicers must consider HAMP-eligible borrowers for HAFA within 30 calendar days after the borrower:

• Is determined by the Servicer not to qualify for a HAMP Trial Period Plan.
• Does not successfully complete a HAMP Trial Period Plan.
• Is delinquent on his or her modified HAMP mortgage by missing at least two consecutive payments.
• Is offered, but refuses, a HAMP Trial Period Plan and any other Freddie Mac home retention solution, and requests a short sale or deed-in-lieu of foreclosure.

HAFA Short Sale Solicitation

• Servicers must proactively notify eligible borrowers about the availability of a HAFA Short Sale in writing and allow the borrower 14 calendar days from the date of the notice to respond to the offer.
• Borrowers cannot be offered a HAFA Short Sale Agreement if they are in an active HAMP Trial Period Plan, are performing on a HAMP modification, or are being evaluated for a Freddie Mac Short Payoff.

HAFA Deed-in-Lieu Solicitation

• A HAFA Deed-in-Lieu may be offered if the home does not sell within the HAFA Short Sale marketing period, and Freddie Mac authorizes the HAFA Deed-in-Lieu.

Other solicitation requirements apply as noted in Guide Sections D65.4 and D65.6.

Supporting Documents

The following documents should be used when implementing HAFA.

HAFA Short Sale Documents

• A HAFA Short Sale Agreement (SSA), Form 1135, is the Servicer/borrower agreement that authorizes the borrower to sell the mortgaged property to a third party and have Freddie Mac accept the sale proceeds in full satisfaction of the mortgage.
• A HAFA Request for Approval of Short Sale (RASS), Form 1136, must be completed by a borrower to request approval for a HAFA Short Sale. 
• A HAFA Approval of Short Sale, Form 1137, must be completed by the Servicer and sent to the borrower when they consent and approve a borrower’s request for approval of a HAFA Short Sale.
• A HAFA Disapproval of Short Sale, Form 1138, must be completed by the Servicer and sent to the borrower when they disapprove a borrower’s request for approval of a HAFA Short Sale.

HAFA Deed-in-Lieu Document

• A HAFA Deed-in-Lieu Agreement, Form 1139, is the Servicer/borrower agreement that allows the borrower to transfer ownership of the mortgaged property to Freddie Mac in lieu of foreclosure.

Logos

Servicers may download the Freddie Mac and Making Home Affordable logos to co-brand envelopes and packages from our secure HAMP Web site. Servicers may not use Freddie Mac's logo without also including their own logo and any other disclosures required by applicable federal, State, or local laws (e.g., equal housing lender logo). 

For specific requirements on completing and sending these forms to the borrower, refer to Guide Chapter D65.

Underwriting Requirements

Servicers must first consider eligible borrowers for HAMP and then for other home retention options under Guide Chapter B65 before considering a borrower for a HAFA Short Sale or Freddie Mac Short Payoff.

If their home does not sell within the HAFA Short Sale marketing period, Freddie Mac Servicers may offer the borrower a HAFA Deed-in-Lieu, if approved by Freddie Mac. All potentially eligible borrowers must be considered for HAFA or a Freddie Mac Short Payoff before a mortgage is referred to foreclosure or a pending foreclosure sale is conducted.

HAFA Short Sale

Servicers can evaluate a borrower for a HAFA Short Sale if they previously offered them a HAMP Trial Period Plan or an alternative to foreclosure under Guide Chapter B65, and they declined the offer. However, Servicers may not offer a Short Sale Agreement (SSA) to a borrower if they are currently in an active HAMP Trial Period Plan, performing on a HAMP or Freddie Mac modification, or is in the process of being reviewed for a Freddie Mac Short Payoff.

Servicers are not required to obtain Freddie Mac’s approval before entering into a SSA with the borrower as long as they comply with the minimum acceptable net proceeds, allowable transaction costs, and SSA guidelines outlined in Guide Section D65.5.

HAFA Deed-in-Lieu

A borrower may be considered for a HAFA Deed-in-Lieu once their mortgaged property has been marketed under the HAFA Short Sale process for the full term. If the SSA expired without completing a sale, the borrower is able to convey a clear, marketable title, and all subordinate lien holders, if any, have agreed to release their liens in accordance with Guide Section D65.7(b), Servicers may request permission from Freddie Mac to offer the borrower a HAFA Deed-in-Lieu. The request must be submitted through Workout Prospector as soon as possible, but no later than, 10 calendar days after the expiration of the SSA.

For specific consideration and evaluation requirements, refer to Guide Sections D65.3 and D65.4.

Workout Prospector®

Servicers must use Workout Prospector for all borrowers being considered for a HAFA Short Sale or HAFA Deed-in-Lieu. Servicers can access Workout Prospector from our Servicing Technology Tools Web page. You will need your secure Workout Prospector ID and password to access the tool. If you are a first-time user of Workout Prospector or need to update your account, complete the online Workout Prospector registration form.

HAFA Short Sale

Servicers will need to identify the mortgage as a HAFA loan for eligible borrowers. Enter the following information in the corresponding Workout Prospector screens in addition to following the requirements outlined in Guide Sections D65.5(f) and C65.6(a):

• HUD 1, Line 1306: Input the HAFA borrower relocation incentive as $3,000 with a note to indicate "HAFA Relocation Incentive ".
• HUD 1, Line 505: Enter the junior lien(s) payout amount.
• Warnings and Comment Screen, Recommendations Tab: Indicate that the loan type is a HAFA Short Sale at the very top of the section. Servicers must input this information even if the loan is delegated, in the following format: HAFA SHORT SALE.

Servicers must then send an e-mail with the Freddie Mac loan number and notation “HAFA Short Sale – Approval” in the subject line.

HAFA Deed-in-Lieu

If Freddie Mac approves a borrower for a HAFA Deed-in-Lieu, Servicers need to identify the mortgage as a HAFA loan. Enter the following information in the corresponding Workout Prospector screens in addition to following the requirements outlined in Guide Sections D65.6(a) and C65.6(a):

• Deed-in-Lieu Override Screen, Miscellaneous Expenses: Enter the HAFA borrower relocation incentive as $3,000 with a note to indicate "HAFA Relocation Incentive ".
• Deed-in-Lieu Override Screen, Liens (Junior and Senior): Enter the total amount of payments made to the subordinate lien holders.
• Warnings and Comment Screen, Recommendations Tab: Indicate that the loan type is a HAFA Deed-in-Lieu at the very top of the section. Servicers must input this information even if the loan is delegated, in the following format: HAFA DEED IN LIEU.

Servicers must then send an e-mail with the Freddie Mac loan number and notation “HAFA Deed-in-Lieu – Approval” in the subject line.

Reporting and Incentives

Reporting Requirements

In addition to reporting HAFA data to the program administrator, Servicers must report specific loan-level data through Electronic Default Reporting (EDR). For the interim, Servicers must also e-mail the HAFA Monthly Activity Report to Freddie Mac at HAFA@FreddieMac.com within the first three business days of each month.

As announced in the July 16 Guide Bulletin, beginning September 1, 2010, Servicers will be required to report the two new HAFA EDR codes, HF and HAF, to Freddie Mac and they will no longer need to submit the monthly activity report . If Servicers begin reporting EDR codes HF and HAF prior to September 1, they may stop sending the activity report beginning with the first month in which they begin reporting the new EDR codes for the prior month’s activity.

Below are high-level reporting requirements for both HAFA Short Sales and HAFA Deeds-in-Lieu. For specific requirements, refer to Guide Section D65.10.

HAFA Short Sales Reporting

Depending on the state of the HAFA Short Sale, Servicers will need to report the following codes through EDR to Freddie Mac no later than September 1, 2010, for the September reporting cycle, for August activity:

• HB – "Short Sale in Review": To report the mortgage is being reviewed for a short sale.
• HC – "Ineligible for Short Sale": To report the borrower is ineligible for a short sale.
• HF – " Short Sale Agreement (SSA) – Borrower Execution": To notify us that the borrower has executed the SSA.
• HAF – "Home Affordable Foreclosure Alternative": To be used together with 09 Forbearance Plan while the mortgaged property is in the marketing period.

HAFA Deed-in-Lieu Reporting

To close a HAFA Deed-in-Lieu with Freddie Mac, Servicers must:

1. Report the transaction through MIDANET®, using the Foreclosure Sale/DIL transmission within one business day of receiving the executed deed.
2. Within five business days, fax to Freddie Mac proof that the subordinate liens have been paid or released along with a copy of the executed deed showing conveyance between the borrower and Freddie Mac.
3. Report the mortgage as a transfer to REO through MIDANET.

Incentive Compensation

Servicer Incentives 

• $2,200 for each successfully completed HAFA Short Sale.
•  $1,500 for each successfully completed HAFA Deed-in-Lieu.

Borrower Incentives

• $3,000 will be paid to the borrower to help with relocation expenses after a completed HAFA Short Sale or HAFA Deed-in-Lieu.

Subordinate Lien Holder Incentives

• Six percent of the outstanding unpaid principal balance of each subordinate lien in order of lien priority, with an aggregate total of $6,000 to all lien holders, will be offered in exchange for releasing their liens and satisfying the underlying debts.

Servicers must refer to Guide Section D65.8 for specific details on HAFA’s Servicer and borrower incentive compensation. Refer to Guide Section D65.7(b) for requirements and details on the subordinate lien holder incentive.

Announcements

Guide Bulletins

• June 1, 2010

Single-Family Advisory E-mails

• June 1, 2010