In the event that the HAMP (loan modification) program is not an option either because the borrower can not qualify, fails to keep their new payment current or opts out of the program, then the next option to avoid FORECLOSURE is the HAFA Making Home Affordable  short sale program just introduced in the spring of 2010 to encourage lenders to do a short sale with the borrower rather than foreclose.

The coditions to apply for HAFA include:

1. All home retention options must be offered to the borrower.

2. Any loan servicer participating in HAMP must also implement HAFA

3. If the HAMP loan modifiation program does not work, the borrower agrees to a HAFA

    shortsale.

4. The mandated HAFA process will apply to the Short Sale

5. The program will expire on December 31, 2012 (same as HAMP)

The HAFA process has been designed to allow the borrower to request a "SHORT SALE" before they have an offer on the home.  The short sale paperwork can be processed prior to listing the property and the lender will determine the property value and a price they will accept as the payoff or their loan.  This allows the borrower to list the property as an APPROVED short sale, with a price that the lender will accept if an offer is presented.

This program is still too new to know for sure, but it promises to be a big improvement in speeding up the process, so that the short sale should able to be completed just like a regular sale, with an offer being accepted quickly by the lender and a normal escrow period!  Lenders must agree to strict timelines for approval of the offer!

The federal government offers cash incentives to the lender to participate, which will help offset their processing costs, and offers up to $3000 to the borrower for relocation.  Also, the lender agrees to not seek a deficiency judgement against the borrower, accepting the proceeds of the sale as payment in full for the loan!

More information on this program can be found at www.MakingHomeAffordable.gov, the govrnment website for the Making Home Affordable Programs.