When borrowers get into trouble on their FHA mortgages, the FHA encourages them to act quickly in order to save their homes. But some borrowers don’t act fast enough and fail to qualify for some government home loan modification or refinancing programs.
Other borrowers aren’t qualified for certain programs even when they do act. In cases where a borrower has tried loan refinancing, modification or other home owner bailout programs there may be an alternative to foreclosure in the form of something known as the short sale.
The Making Home Affordable program was started by the government to give assistance to struggling homeowners. One part of Making Home Affordable is the Home Affordable Foreclosure Alternatives program, which offers the HAFA Short Sale option.
Short selling is where the borrower sells his or her property for less than the full amount due on the FHA home loan or conventional mortgage. As part of the HAFA Short Sale program, the buyer does just that with the approval of the loan officer, who accepts the money from the proceeds of the sale, “in full satisfaction of the mortgage” according to the Home Affordable official page.
For the home owner, that means once the sale is complete and the lender has been paid, the loan is considered paid off even though the sale price is less than the amount owed on the home.
Borrowers are not automatically eligible for this program–they must be evaluated for it within 30 days if the borrower doesn’t otherwise qualify for the Home Affordable Modification Program (HAMP), or when the borrower becomes delinquent on a HAMP modification, or does not successfully complete a HAMP trial period.
According to the Making Home Affordable official site, “before evaluating a homeowner for HAFA, a participating servicer must first consider that homeowner for other loan modification or retention programs that they offer.”