More than five million homeowners now owe more than their homes or worth or are at risk for foreclosure because they can no longer afford their mortgage payments. In March of 2009, the Obama administration introduced a major housing relief effort, starting with the Home Affordable Modification Program (HAMP).

The first part of HAMP involved a loan modification program, which was designed to help homeowners modify their existing loans in order to get monthly payments that would help them stay in their homes and avoid foreclosure. Since the program launched last year, more than 300,000 modifications have been processed and are active.  Loan servicers saw a decline in permanent modifications in May 2010 from (47,000 from 68,000 in April 2010). The $75 billion HAMP will expire in 2012.

In March of this year, the Treasury Department introduced another program for troubled homeowners - Home Affordable Foreclosure Alternatives (HAFA). This program which took effect April 5, 2010, was also designed to keep homeowners from being forced into foreclosure – by standardizing and expediting the short sale process, along with a $3,000 incentive. Under HAFA, once the lender has agreed to the short sale and forgiven the balance, it cannot go after the deficiency judgment and harass the borrowers. 

A major benefit of this new plan is that the lenders have to respond to the homeowners’ written requests for the short sale within ten days. One of the largest detriments to any short sale is the long and cumbersome process from initiation to close. HAFA creates a platform for standardization of short sale and deed in lieu of foreclosure forms and criteria.

The Treasury Department continues to make revisions to the program, even though it has only been in place for a few months. But because of the large amount of requirement revisions to paperwork that is intended to provide a new standardization, many lenders are even more wary to jump on board and begin training workers. This program will close on December 31, 2012.

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