Is HAFA Relocation Assistance Program Irresponsible

by Sherri in Andover, MN and by Rhubeeh in Avon Park, FL

Ask Kate if HAFA relocation payments are irresponsible: Sherri has a reasonable concern with Making Home Affordable's foreclosure alternative program. Should the banks be paying people hard cash to walk away from their homes after months of not making house payments? Should distressed homeowners receive forgiveness of the mortgage deficiency after a HAFA short sale or deed-in-lieu of foreclosure?


Do HAFA relocation payments make sense?

By Sherri in Andover, MN
Do HAFA relocation payments make sense?

You've got to be kidding me. A person defaults on paying their loan, stays in the home payment free for months and THEN the bank pays them $10,000 (increased from $3000) so they can move?

Not to mention that the bank has to forgive the deficiency balance and take back the property at a loss.

Does this make sense to anyone?

***zz-portrait-left.shtml*** Ask Kate answers: Do HAFA relocation payments make sense?

Hi Sherri,

Although there are homeowners who no-doubt have gamed the system, the majority who receive the $10,000 HAFA relocation assistance are in dire financial straits.

They have attempted HAMP modifications without success, lost their jobs, or fell seriously ill. Likely, declining real estate values ate up any hope of selling the house. Often, it is a crushing combination.

Banks Also Benefit From HAFA Foreclosure Alternatives

But in addition to distressed homeowners receiving monetary assistance to help them transition into more affordable living arrangements, banks also benefit from the HAFA program.

Often in a foreclosure, lenders inherit a demolished property, costing them thousands in labor and repairs. Dishwashers are missing, doorknobs, even kitchen countertops. Every day a foreclosed house sits in a state of disrepair, unable to be sold, it costs the banks money.

But when a property is delivered back in a marketable condition, lending institutions have the option of listing the house immediately for sale.

Qualifying for HAFA

Under the HAFA program, homeowners are required to produce a totally vacant property in broom-swept condition to receive the $10,000 payment. Not one personal item can be left behind, for example, outdated TVs, old clothes, or broken-down cars. Appliances, flooring, and light fixtures must be in place. There can be no structural defects and the title must be marketable.

Additionally, all homeowners are subject to a qualification process, not unlike getting a mortgage. Tax returns, paystubs, bank statements, and a documented hardship are evaluated.

See more on qualifying criteria at HAFA: Program Alternatives to Foreclosure.

However, participating homeowners, either by deed-in-lieu of foreclosure or short sale do not escape the process unscathed. Credit scores suffer for many years, making it more complicated to get the next mortgage approval. The $10,000 assistance payment is also taxed as ordinary income.

But hopefully, we will be able to look back in a few years to see long-term benefits to both the homeowner and the lending institutions, and in turn, our neighborhoods and country as well.

I appreciate your letter and wish you the best,


Is there any help out there for modifying a 2nd mortgage?

By Rhubeeh in Avon Park, FL
Is there any help out there for modifying a 2nd mortgage?

Hi Kate:

I just got approved for the HAMP program for my first mortgage, but still have a 2nd mortgage.

Is there any help out there that can help me lower the balance? Right now all I am paying is the interest so I could afford it.

Any info will help me out.

***zz-portrait-left.shtml*** Ask Kate answers: Is there any help out there for 2nd mortgage?

Hi Rhubeeh,

Depending on the lender, your 2nd mortgage may be eligible for a payment modification and/or principal reduction of the amount owed.

If both your 1st and 2nd mortgages are held by the same institution, you should be getting an offer to modify the 2nd in a couple of months, following the final modification of the 1st.

But you don't have to wait to find out. Call the loan servicer today to ask how to get the process started. Or if your 2nd is with another bank, give them a call.

You can read more about the other Making Home Affordable (MHA) options here: Special Edition of Making Home Affordable Options.

Best wishes,



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Over a Year but No $3000 Relocation Assistance
by: Judd W.

Hi Kate,

I completed a deed in lieu of foreclosure and they said I would receive up to $3000 for relocation assistance. It has been a year and I have not received anything.

I feel fortunate they let me go with the deed in lieu of foreclosure so I don't want to bother them about it, but it sure would come in handy. Please let me know your thoughts if you get a chance.

Thank You, Judd

Hi Judd, Kate here...

This is one circumstance where I'd say patience is not a virtue.

If you were assigned an Asset Manager to walk you through the deed in lieu of foreclosure, give him or her a call immediately.

Otherwise, get in touch with the lender's loan servicing department.

If that doesn't work, contact one of the Making Home Affordable HUD-approved counselors and ask for help tracking down where your money went. Call them at 888-995-4673.

Best wishes, Kate

P.S. Have the loan number handy, the lender's name, and the date the deed in lieu finalized.

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