The Home Affordable Foreclosure Alternatives (HAFA) program was created in 2010 to offer homeowners a structured way to avoid foreclosure when keeping their home was no longer an option. Though the program officially expired in December 2016, understanding its legacy remains valuable for real estate professionals and borrowers navigating distressed property sales.
HAFA was part of the broader Making Home Affordable program and acted as a safety net for homeowners who did not qualify for or were unsuccessful in a Home Affordable Modification Program (HAMP) trial. HAFA provided a streamlined way to pursue a short sale or a deed in lieu of foreclosure, while offering benefits to borrowers, servicers, and real estate agents alike.
Let’s break down the process, eligibility criteria, and lasting implications of the HAFA program so real estate professionals can help clients navigate similar options still available through loan servicers or nonprofit housing counselors.
A deed in lieu of foreclosure is one of the foreclosure alternatives that HAFA made easier for struggling homeowners. Instead of going through a full foreclosure process, the borrower voluntarily transferred ownership of their property back to the lender.
Under HAFA, a deed in lieu offered significant advantages:
Though HAFA is no longer active, many lenders still accept a deed in lieu under current guidelines. A deed in lieu may still be a viable option, especially when the short sale process fails or the home doesn’t sell.
HAFA was never meant to be the first option for distressed borrowers. To even qualify for HAFA, the borrower first had to be evaluated for HAMP, which was a loan modification program designed to help homeowners keep their homes by reducing monthly mortgage payments.
A loan modification typically involved:
Only after the borrower had been denied a HAMP modification—either by failing to qualify, defaulting during the trial, or requesting a short sale directly—could they be evaluated for HAFA options.
The foreclosure process can be long, stressful, and financially damaging. HAFA offered a structured alternative that kept homeowners out of the court system and avoided eviction. In a traditional foreclosure, homeowners often face legal action, credit damage, and the eventual forced sale of their home.
With HAFA:
The HAFA program was also designed to support the role of the real estate professional in the short sale process. HAFA ensured that servicers could not require a reduction in the real estate commission stated in the listing agreement—up to 6% was protected.
Realtors played a vital role in:
Even today, the involvement of a knowledgeable real estate agent can be the difference between a successful short sale and a foreclosure.
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The core of the HAFA program was its support for the short sale as a way for struggling homeowners to exit their mortgage without facing foreclosure. In a short sale, the lender agrees to accept less than the full amount owed on the mortgage when the home is sold.
HAFA made short sales more predictable and borrower-friendly by:
Real estate agents working with short sale properties benefited from clearer expectations and faster approvals.
Credit.org supported real estate professionals through its unique RAPID® (Realtor Appointment Processing In Demand) program. This offered streamlined HAFA counseling for homeowners, making it easier for real estate agents to connect clients with certified HUD counselors.
Through this process:
While HAFA is no longer active, counselors who provided RAPID® counseling continue to help homeowners navigate alternatives like a short sale or deed in lieu.
It’s important to note that HAFA was not available for every type of mortgage. Loans owned or guaranteed by Fannie Mae or Freddie Mac had their own foreclosure alternative programs, which closely mirrored HAFA but operated separately.
Borrowers had to check whether their mortgage was owned by Fannie Mae using the loan lookup tool. This determined their eligibility and the path forward.
Returning to the idea of the deed in lieu, it was seen as a backup if a short sale couldn’t be completed. HAFA made this process simpler by:
Even in today’s market, some lenders still offer this agreement under different terms, particularly if the home is underwater and a buyer can’t be found.
When a homeowner begins to fall behind on mortgage payments, avoiding foreclosure becomes a top priority. The earlier action is taken, the more options are available. Programs like HAFA were designed to step in before the foreclosure process began or reached a point of no return.
Homeowners often fear communication with their lender, but staying silent only narrows their choices. A missed payment can quickly lead to default, and after a few months of delinquency, the lender may begin foreclosure proceedings.
To avoid foreclosure, it’s essential to:
The HAFA program once guaranteed that homeowners would be evaluated for short sale or deed in lieu options within 30 days of failing HAMP. While this specific rule no longer applies, many servicers still follow similar review processes under their current guidelines.
A “lieu agreement” refers to the formal deed in lieu arrangement between the borrower and the lender. Under HAFA, this was a streamlined alternative to the traditional foreclosure process. The agreement stated that the homeowner would transfer ownership of the home to the lender voluntarily, and in return, the lender would release the homeowner from further obligation on the mortgage debt.
Benefits of a HAFA deed in lieu agreement included:
This was a big win for homeowners who were underwater and couldn’t sell the home through a short sale. While modern deed in lieu agreements may have different terms, the HAFA model remains a reference point for fair treatment and financial clarity.
One of the most important aspects of HAFA was how it addressed the issue of lingering debt. In a typical short sale or foreclosure, the homeowner may still owe the remaining loan balance after the home is sold. This is known as a deficiency balance.
HAFA eliminated this risk. When a short sale or deed in lieu was completed under HAFA:
For many borrowers, this meant true closure on a distressed property—no lawsuits, no collections, and no further financial obligations tied to the mortgage.
Selling a home by short sale requires careful planning and professional support. Real estate agents working on these transactions must manage expectations, work closely with servicers, and help sellers gather required documentation. Although HAFA set a high bar for organization and response times, many of these practices still apply.
Steps to list and sell a short sale:
Real estate professionals also needed to understand HAFA-specific forms like the RASS and the Alternative RASS. These tools simplified the approval process and ensured consistent treatment across cases.
The phrase “lieu of foreclosure” is shorthand for the deed in lieu agreement. However, it’s important to distinguish this from foreclosure itself. In a foreclosure, the lender forcibly repossesses the home through legal proceedings. This often results in:
A deed in lieu of foreclosure, by contrast:
While the HAFA version of this process is no longer available, many lenders still consider the deed in lieu of foreclosure alternative, particularly when short sale efforts have failed.
Even though HAFA officially ended in 2016, its framework and borrower protections live on in the policies of many mortgage servicers and government-backed programs. The lessons learned from HAFA—especially around communication, standardized documentation, and borrower protections—help shape how short sales and deed in lieu agreements are handled today.
Realtors, housing counselors, and homeowners can still benefit from:
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As a real estate professional, your role in helping homeowners avoid foreclosure cannot be overstated. Even though the HAFA program has ended, your ability to connect clients with foreclosure alternatives, guide them through short sales, or advise them about deed in lieu agreements remains critical.
By continuing to:
…you can make a real difference for clients facing financial hardship and guide them to the best possible outcome—even after the end of HAFA.
For any nonprofit housing counseling needs, Credit.org has certified counselors standing by.
