Home Affordable Foreclosure Alternatives

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Government Sponsored Enterprises (GSE) Fannie Mae and Freddie Mac last week released guidelines for implementing the Treasury Dept.’s Home Affordable Foreclosure Alternatives Program (HAFA).  The new guidelines apply to loans owned or guaranteed by the GSEs; servicers are required to implement the new policies no later than Aug. 1.

While largely consistent with the HAFA guidelines for non-GSE mortgages, both Fannie and Freddie have implemented changes. To qualify for the Freddie Mac HAFA program, borrowers must be more than 60 days delinquent and have cash reserves of less than $5,000 or three times the current monthly mortgage payment, whichever is greater.  Similar to the non-GSE HAFA program, Fannie Mae allows borrowers to qualify if they are at imminent risk of default.  However, Fannie prohibits borrowers from participating in HAFA if the borrower: Has the ability to continue making mortgage payment, but chooses not to do so; has substantial encumbered assets of significant cash reserves equal to or exceeding three times the borrower’s total monthly mortgage payment or $5,000, whichever is greater; or has high surplus income.

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