Investing Assets & Markets Real Estate Investing What Is the HAFA Short Sale Program? HAFA Short Sale Program Explained By Elizabeth Weintraub Elizabeth Weintraub Facebook Twitter Elizabeth Weintraub is a nationally recognized expert in real estate, titles, and escrow. She is a licensed Realtor and broker with more than 40 years of experience in titles and escrow. Her expertise has appeared in the New York Times, Washington Post, CBS Evening News, and HGTV's House Hunters. learn about our editorial policies Updated on March 15, 2022 Reviewed by Andy Smith Reviewed by Andy Smith Andy Smith is a Certified Financial Planner (CFP), licensed realtor and educator with over 35 years of diverse financial management experience. He is an expert on personal finance, corporate finance and real estate and has assisted thousands of clients in meeting their financial goals over his career. learn about our financial review board Fact checked by Lakshna Mehta Fact checked by Lakshna Mehta Lakshna Mehta is a writer, editor, and fact checker. She received a Master of Arts in Journalism, a Bachelor of Journalism, and a Bachelor of Arts in International Studies from the University of Missouri. She has had the opportunity to write and edit for newspapers, magazines, and digital publications on a wide variety of topics. As a fact checker for The Balance, she verifies all facts with credible sources and updates data as needed. learn about our editorial policies In This Article View All In This Article What Is the HAFA Short Sale Program? How the HAFA Short Sale Program Worked Benefits of a HAFA Short Sale Alternatives to the HAFA Short Sale Program Photo: David Sacks / Photodisc / Getty Images Definition The Home Affordable Foreclosure Alternatives (HAFA) short sale program, effective from April 5, 2010, through Dec. 31, 2016, was a government-sponsored program designed to ease the process of real estate short sales. It pre-approved a price and gave the homeowner four months to sell. What Is the HAFA Short Sale Program? The HAFA short sale program initially promised short sale approval within 10 days and gave the seller up to $10,000 to help with relocation at closing. HAFA was part of President Obama's Making Home Affordable Program. Note The program accepted no new applications after December 31, 2016, and existing files needed to close by December 1, 2017. How the HAFA Short Sale Program Worked The first step was for a borrower to apply to the Home Affordable Modification Program (HAMP), which has also ceased accepting applications. The federal government offered the Home Affordable Refinance Program (HARP) as a mortgage refinance option through the end of 2018. These were the rules to be eligible for the now-defunct HAMP program: Only personal residences are eligible. The mortgage amount must be less than $729,750. The borrower suffers a hardship such as loss of income, an increased mortgage payment, or an unexpected increase of expenses. The mortgage originated before Jan. 1, 2009. The PITI mortgage payment, including HOA fees, is more than 31% of the borrower's gross monthly income. If any of the five rules did not apply, then the borrower was not eligible for HAMP. Once HAMP turned you down, you became eligible for HAFA. Or, if accepted into HAMP, and you stopped making loan modification payments, you could apply to HAFA. Note Once the borrower was rejected for a loan modification through the HAMP Program, the borrower was then eligible to apply to the HAFA Short Sale program or pursue a Deed in-Lieu-of Foreclosure. HAFA would pre-approve the price of that short sale and give the seller four months to sell the property through a real estate agent. Here are the eligibility requirements: Personal residences and non-owner properties were eligible for HAFA.The mortgage amount must be less than $729,750.The seller must be behind or about to fall behind on the mortgage.The mortgage originated before January 1, 2009.The seller was or would be rejected by HAMP for a loan modification.Sellers who have government loans may qualify under a different program. Benefits of a HAFA Short Sale After a seller had jumped through these hoops, second lenders could no longer try to force a seller to commit short sale mortgage fraud by demanding payments outside of escrow. These were other HAFA benefits: Lenders that participate in HAFA waived the right to a deficiency judgment. Junior lenders could receive up to $12,000 of the loan balance to release the loan. Sellers received a government payment of $10,000 at close of escrow to cover relocation expenses, providing the home was owner-occupied. Sellers would not be required to make a seller contribution. Lenders would agree not to foreclose during the short sale process. With the exception of Fannie Mae, Freddie Mac, VA and FHA loans, the sellers' mortgage payment did not need to exceed the 31% ratio. Another condition of HAFA was that all parties must sign an arm's length affidavit. In other words, the seller could not sell to a person the seller knows or to whom the seller was related. The buyer must also agree not to sell the property for a minimum of 90 days. Alternatives to the HAFA Short Sale Program Although these government programs are no longer available, homeowners can try to qualify for a foreclosure avoidance program through the owner or servicer of their loan, such as Fannie Mae or Freddie Mac. One example is the Flex Modification program. Lenders may also offer in-house or proprietary modification programs, repayment plans, or forbearance agreements, so check with your lender for options. Very few borrowers qualify for a loan modification and many short sales are for sellers who were rejected for a loan modification. Key Takeaways The Home Affordable Foreclosure Alternatives (HAFA) short sale program was a government-sponsored program designed to ease the process of real estate short sales.It was effective from April 5, 2010 through December 31, 2016.Homeowners seeking relief must now work directly through their lender. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Making Home Affordable Program. "Handbook for Servicers of Non-GSE Mortgages," Pages 189-190. Accessed May 6, 2021. Making Home Affordable Program. "Handbook for Servicers of Non-GSE Mortgages," Page 61. Accessed May 6, 2021. Making Home Affordable Program. "Handbook for Servicers of Non-GSE Mortgages," Pages 70-71. Accessed May 6, 2021. Making Home Affordable Program. "Handbook for Servicers of Non-GSE Mortgages," Page 178. Accessed May 6, 2021. Making Home Affordable Program. "Handbook for Servicers of Non-GSE Mortgages," Pages 177-178. Accessed May 6, 2021. Making Home Affordable Program. "Handbook for Servicers of Non-GSE Mortgages," Pages 177-196. Accessed May 6, 2021. Making Home Affordable Program. "Handbook for Servicers of Non-GSE Mortgages," Page 189. Accessed May 6, 2021.