Not known for speed, Freddie Mac and Fannie Mae finally released their versions of HAFA (Home Affordable Foreclosure Alternatives) last week.

The Freddie Mac program will take off August 1, 2010, but servicers can start using their initiative version right away.  Just like the HAFA we already know, servicers will have to offer homeowners a HAMP modification first and borrowers can receive up to $3000 in relocation assistance.

How are Freddie HAFA sales different from the standard program?

• Freddie’s program is the allowances to subordinate liens.  Each junior lien, in order of priority, may receive no more than 6% of their unpaid principal balance up to an aggregate cap of $6000,   in exchange for release of the subordinate liens and satisfaction of the underlying debts.  That means that if a home has 2 liens in subordinate position, one is a $210,000 HELOC recorded before a $2700 HOA lien, the HELOC will only get $6000 and the HOA nothing.
• Freddie Mac will accept the short-sale minimum acceptable net proceeds in satisfaction of the amount owed under the note and release of its lien
• Freddie Mac will not require promissory notes or cash contributions from the borrower by Subordinate lienholders must also agree to release all liens without promissory notes or contributions from the borrower in order for the borrower to close under the program.

Fannie Mae HAFA sales include greater incentives for the servicers, taking the max under the Treasury program at $1500 to $2,200.

In our loss mitigation office, we cringe when we hear the negotiator confirm the investor is Fannie and Freddie.  Their involvement has historically meant longer approval times.

The snails pace would make it hard to effectively market the property for a FMV retail buyer who would be willing to wait it out while their minimum net requirements would often dissuade investor offers.  The new HAFA initiatives may help speed up the process!  Thanks Fannie and Freddie.  See you down the road!