Foreclosure Alternative Program

Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.

A short sale can also be the best option for homeowners who are "upside down" on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially.

View our "Short Sale Option" video:


Real Estate One - The Short Sale Option

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What programs are available to homeowners?


Home Affordable Modification Program (HAMP)

The Home Affordable Modification Program is designed to help as many as 3 to 4 million financially struggling homeowners avoid foreclosure by modifying loans to a level that is affordable for borrowers now and sustainable over the long term. The program provides clear and consistent loan modification guidelines that the entire mortgage industry can use.


Home Affordable Foreclosure Alternative (HAFA)

The Home Affordable Foreclosure Alternatives Program, known as HAFA, is designed to help owners (referred to below as borrowers) who are unable to retain their home under the Home Affordable Modification Program (HAMP). While the first priority is to keep families in their homes, where this is not possible with a loan modification, they may be able to avoid foreclosure by completing a short sale or a deed-in-lieu of foreclosure (DIL) under HAFA. What is a short sale?

  • A short sale is a transaction in which the lender(s) agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.

  • A Deed in Lieu of foreclosure (DIL) is a disposition option in which a mortgagor voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage. A DIL of foreclosure may not be accepted from mortgagors who can financially make their mortgage payments.


Home Affordable Refinance Program (HARP)

The Home Affordable Refinance Program (HARP) is designed to assist homeowners in refinancing their mortgages even if they owe more than the home's current value. The primary expectation for Home Affordable Refinance is that refinancing will put responsible borrowers in a better position by reducing their monthly principal and interest payments or moving them from a more risky loan structure (such as interest-only or short-term ARM) to a more stable product (such as a fixed-rate mortgage).

What challenges do REALTORS® face when assisting homeowners?

The rapid increase in the number of short sales, and the short sales process itself present a number of challenges for REALTORS®. Major challenges include:

  • Limited support from Servicers
  • Absence of a uniform process and application
  • Multiple lenders

HAFA is designed to address many of the challenges presented by short sales.

What should homeowners know?

  • To contact their lender to determine their alternatives.
  • There are new government programs that may help them avoid foreclosure.
  • They may be able to refinance with a local lender.

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Disclaimer: Making Home Affordable and Short Sales require the assistance of a team of professionals. Each homeowner's situation is unique and this information serves as a guide. Borrowers should seek legal and financial advice from their attorney and accounting professional. Valuable information is available at IRS.gov. Buyers should also have a clear understanding of the provisions that relate to the purchase of a Short Sale, as time limitations will apply to them as well.