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Will HAFA Help Sell?

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Posted On: 10/27/2010

QUESTION:

What's the HAFA program and can it help me sell my home?

ANSWER:

Through July the government's Making Home Affordable plan had saved more than 430,000 homes from foreclosure. However, almost 630,000 borrowers could not complete the program.

The Home Affordable Foreclosure Alternatives Program (HAFA) is for residential borrowers who could not succeed with a Making Home Affordable modification or missed at least two payments in a row once they had a "permanent" loan modification. Under HAFA, borrowers can ask lenders for help with a short sale or with a deed-in-lieu of foreclosure and receive as much as $3,000 for relocation expenses.

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For specifics speak with your lender if you've been unable to complete a modification under the Making Home Affordable program.

QUESTION:

Since lenders are no longer making option ARM loans is such financing still part of the foreclosure crisis?

ANSWER:

It's true that lenders no longer offer option ARMs, financing that allowed borrowers to obtain a loan with monthly payments that were routinely less than even the interest cost of the loan. However, huge numbers of such loans remain outstanding. Fitch Ratings reports that option ARMs worth $134 billion will soon be "re-cast," meaning that the low payments borrowers enjoyed during "start" periods will end and that new and higher payments will begin. How much higher? On average, says Fitch, the new payments will be 63 percent larger.

Because most borrowers (94 percent, says Fitch) have only been making minimum payments, they have loans that have higher loan balances (because the unpaid interest has been added to the mortgage amount), while at the same time home values in most cases have fallen. The result is that the property cannot be sold for enough to cover the mortgage and owners cannot afford the higher monthly costs. So yes, even though they are not being offered anymore, option ARMs remain a part of the foreclosure problem.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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