BY: CARRIE BAY from
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annie Mae and Freddie Mac both issued new guidelines to servicers Tuesday, which allow homeowners with GSE loans to pursue a short sale or deed-in-lieu of foreclosure if they are unable to secure a modification under the government’s foreclosure prevention program.
When the Treasury’s Home Affordable Foreclosure Alternatives (HAFA) program rolled out in early April, officials explained that the GSEs’ loans were not eligible – an interesting omission considering Fannie and Freddie are operating under full government control and have been positioned as the support columns of the administration’s response to the housing crisis.
The GSEs’ exclusion from HAFA was puzzling to a number of industry experts and a common query posed by our DSNews.com readers. In response, Treasury officials said then that they were anticipating Fannie and Freddie to launch their own short sale-friendly programs – and those announcements came Tuesday.
Both Fannie Mae and Freddie Mac encouraged servicers to begin implementing their HAFA procedures “immediately.” By August 1, 2010, all Fannie Mae and
Freddie Mac servicers must have incorporated HAFA into their operations and begin offering HAFA solutions to eligible borrowers. The program is effective through December 31, 2012.
Like the original HAFA guidelines issued from Treasury, Fannie and Freddie loans must first be found eligible for the Home Affordable Modification Program (HAMP). If the borrower then fails to fulfill their HAMP obligations, a HAFA short sale or deed-in-lieu will be offered, but unlike the non-GSE HAFA program, Fannie and Freddie stipulate that HAFA can be applied only after “all other home retention workout options have been exhausted.”
According to the HAFA servicing guide issued by Fannie Mae, “All servicers must implement Fannie Mae’s HAFA for all conventional mortgage loans that are held in Fannie Mae’s portfolio, that are part of an MBS [mortgage-backed securities] pool that has the special servicing option, or that are part of a shared-risk MBS pool for which Fannie Mae markets the acquired property.
Freddie Mac’s HAFA servicing bulletin specifies “first-lien mortgages owned, guaranteed, or securitized by Freddie Mac that were originated on or before January 1, 2009.”
The GSEs will pay financial incentives to both servicers and borrowers who make use of a short sale or a deed-in-lieu to avoid a foreclosure on a HAMP-eligible loan. Servicers will receive $2,200 for every HAFA short sale and $1,500 for every HAFA deed-in-lieu completed. Borrowers are entitled to an incentive payment of $3,000 to assist with relocation expenses.
The Treasury recently raised its HAFA payouts. For both short sales and deeds-in-lieu completed on non-GSE loans, servicers get $1,500, and $3,000 goes to the borrower.
