Fannie Mae and Freddie Mac Release Their HAFA Guidelines

Fannie Mae and Freddie Mac Release Their HAFA Guidelines 

On June 1, 2010, Fannie Mae and Freddie Mac each released guidelines for implementing the Treasury Department's Home Affordable Foreclosure Alternatives Program (HAFA). These new guidelines apply instead of the HAFA guidelines for non-GSE mortgages. Servicers are required to implement these policies no later than August 1, 2010. While largely consistent with the HAFA guidelines for non-GSE mortgages, Fannie and Freddie have each made some important differences. 

To be eligible under the non-GSE HAFA program, the borrower must be delinquent or default must be reasonably foreseeable. Under Freddie's requirements, a borrower must be more than 60 days delinquent and have cash reserves less than the greater of $5,000 or three times the current monthly mortgage payment. Fannie allows borrowers to be at imminent risk of default. Fannie also prohibits a borrower from participating in HAFA if the borrower has the ability to continue making the mortgage payments, but chooses not to do so (sometimes called strategic default); has substantial unencumbered assets or significant cash reserves equal to or exceeding three times the borrower's total monthly mortgage payment or $5,000, whichever is greater; or has high surplus income. 

Fannie and Freddie provide that the real estate commission is the amount in the listing agreement, but not more than 6 percent. 

Fannie and Freddie allow for servicer incentives of $2,200 for a short sale and $1,500 for a deed-in-lieu of foreclosure (DIL). This is in contrast to the $1,500 servicer incentive for both a short sale and a DIL for non-GSE mortgages. 

For both Fannie and Freddie, each subordinate lien holder in order of priority may be paid no more than 6% of the unpaid principal balance of its loan, until the $6,000 cap is attained. This policy remains unchanged from the non-GSE HAFA program. Consistent with the non-GSE HAFA program, Fannie and Freddie guidelines do not permit subordinate lien holders to require contributions from the real estate agent or borrower as a condition for releasing its lien and releasing the borrower from personal liability. 

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~Tina Jan~
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Coldwell Banker Kivett-Teeters
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