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Foreclosure Alternative
A foreclosure alternative is any workout program pursued by a homeowner who’s at-risk of foreclosure, with the goal of avoiding foreclosure. Foreclosure Alternatives can be programs that are designed to fix any delinquency (lateness) and present the borrower with a more affordable monthly payment. These foreclosure alternatives are often called loan modifications, and can be done using different strategies including: forbearance (temporary lowering of payment), repayment plans, principal forgiveness, and rate reduction. A successful modification program can include one or several of these strategies. Foreclosure Alternatives can also be programs that are designed to provide the homeowner with a graceful exit from a property that they no longer wish to own; for a variety of reasons such as a drop in value or an inability to afford the payments. These foreclosure alternatives include Short Sales and Deed In Lieu of Foreclosure. With these plans, the borrower faces a situation where they owe more than the home is worth, but work out an agreement with their mortgage company that results in a sale of the property that satisfies the original debt, and avoids the foreclosure process.

Foreclosure Alternative Application (Application)
Through Homeowner Connect TM,homeowners will be able to start an application for a foreclosure alternative with their participating servicer. The application contains the documentation needed for the mortgage servicer to be able to qualify the borrower for a foreclosure alternative program. The information requirements for this application have been developed as an industry standard, reflecting the requirements of the Federal Making Home Affordable® Program, as outlined in their programs such as HAMP, HARP, and HAFA. For more information on these programs, you can visit the http://www.makinghomeaffordable.gov site, as well as review the Glossary items below.

Home Affordable Foreclosure Alternatives Program (HAFA)
The Home Affordable Foreclosure Alternatives is a federal program that provides opportunities for homeowners who can’t afford to stay in their home, but want to avoid foreclosure. HAFA helps the transition to a more affordable housing payment through a short sale or deed-in-lieu of foreclosure. The mortgage lender OK’s the homeowner to sell their property (short sale) for a pre-approved amount to avoid foreclosure, or executes a Deed-in-lieu of foreclosure, if selling the property is not possible. Monetary benefits to the mortgage lender and the borrower are provided through HAFA for participation in this program.

Additional terms you may see associated with HAFA :
Deed-in-lieu of Foreclosure
This is a foreclosure alternative transaction where the borrower is released from the mortgage by voluntarily giving title to the lender.

Short Sale
This is a property sale transaction where the proceeds aren’t enough to pay the outstanding mortgage balance (borrower has a negative equity situation).

Negative Equity
Negative equity happens when the value of the property on the mortgage loan is less than the amount of funds needed to pay off the loan. Other terms used to describe negative equity include “under water” or “upside down”.

Home Affordable Modification Program (HAMP)
The Home Affordable Modification Program is a federal program designed to help financially struggling homeowners avoid foreclosure by giving eligible homeowners the opportunity to modify their mortgages to make them more affordable and sustainable. The program gives clear and consistent loan modification guidelines that the entire mortgage industry can use.

Additional terms you may see associated with HAMP :
Loan Modification
A modification is a change to the mortgage’s terms from the original contract (when the mortgage was first taken out). These changes are intended to fix the borrower’s delinquency (lateness) and any arrearages (past-due amount, fees, etc.). A modification can involve any one of, or a combination of, the following options: Reduce monthly payment, extended term, reduced interest rate. A recorded loan modification is a legal change to the terms of the loan and involves getting approval from the lender or investor and mortgage insurer. Some options for a loan modification include:

Repayment Plan
This payment plan is designed to spread out repayment of a past-due balance over a longer period of time. The repayment plan takes into account how much you can pay based on your current financial situation and does not change the original terms of the Loan.

Forbearance Plan
Forbearance is a temporary lowering of a mortgage payment (through partial reduction or total suspension). Typically, any arrearages (past-due amount, fees, etc.) because of the forbearance will be repaid after the underlying reason for the borrower’s hardship has been resolved.