New Program Saves Credit Scores and Curbs Foreclosures

Home Affordable Foreclosure Alternative Program

A new federal program, the Home Affordable Foreclosure Alternative program (HAFA) is designed to help homeowners who can’t afford their mortgages move into housing that is more affordable and save their credit scores along the way. Part of the Home Affordable Modification Program, or HAMP, the program encourages short sales, in which owners can sell a home and cover the mortgage, even if the sale price is less than the loan amount. It also offers as an alternative to foreclosure a deed-in-lieu, or DIL, which allows a homeowner to give up the property to satisfy the mortgage, even if the home is worth less than the loan amount.

HAFA is available to homeowners who are delinquent in paying their mortgage. There are a lot of rules and it doesn’t apply to all loans, including Fannie Mae or Freddie Mac — the two government-run mortgage houses are expected to release guidelines soon.

The program started April 5, 2010, and a homeowner must sign a Short Sale or DIL Agreement by December 31, 2012 to qualify. Though a short sale or DIL will still affect a person’s credit rating, these options are considered better alternatives than foreclosing on a home.

Do you qualify? First, you must apply for a loan modification through HAMP. Owners found ineligible for that program may qualify for HAFA. Call 888-995-4673 to speak to a government-certified mortgage counselor for more information.