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  • unemploymentfrustrationIf your mortgage is underwater (i.e. you owe more on the mortgage than the current market value of your home) and you cannot afford your mortgage payments you should contact your lender immediately and try to negotiate a reduction in your monthly payments. The government provides help for struggling homeowners through the Making Home Affordable HARP and HAMP programs.

    Unfortunately, if you do not qualify for a HAMP or HARP program (click here for more details on these programs), or you fail to complete the trial period of a loan modification, you may find yourself with few options left. The Obama administration has launched the HAFA program to help homeowners who can no longer afford their mortgages and want to avoid some of the negative effects of a foreclosure. HAFA, the Home Affordable Foreclosure Alternatives program, is a last-ditch option for homeowners who want to let their underwater home go and start fresh. The administration calls it a more graceful exit, which allows homeowners to avoid having a foreclosure on their credit history.

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    Traditionally, short sales are a long and painful process, because they require the lender to approve the sale of the home for less than the balance on the mortgage. The purpose of HAFA is to provide lenders and homeowners with incentives to accept the short sale.

    What are these benefits of HAFA? Homeowners who opt for a short sale can receive a grant of up to $3,000 towards relocation costs. This can help towards paying for a deposit on a lease and moving expenses. Lenders also receive financial help to cover the costs of processing the short sale. To qualify for a short sale under the HAFA program you must apply through your lender. Each lender has its own short sale application process but you can expect your lender to request proof of your income, living expenses and proof you have tried to sell the home. Some lenders may also request you enter a loan modification if your income allows you to pay lower monthly payments.

    The new program also speeds up the procedure by requiring lenders to evaluate your short sale application within 30 days. This increases the chances of closing a short sale because potential buyers have shorter waiting period.

    If you feel there is no way you can afford your mortgage, talk to a certified housing counselor and ask about HAFA’s short sale program. You can search for a certified housing counselor approved by the Federal Housing Department at www.HUD.gov.

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