I have not yet done a HAFA with a second mortgage and have been asking this of everyone including Alex Charfen from CDPE and haven't gotten a definitive answer.

Will the second mortgage give full release and satisfaction to the borrower instead of pursuing a payment plan, turning it over to collections, and/or suing for deficiency?



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Here's the short answer: The second lien holder will also have to agree to participation in the HAFA program. If the second lien holder will not release the lien the sale will not qualify for HAFA, the borrower may still qualify for a "traditional" short sale, however.

It is not always a "done deal" that second lien holders are going to participate in HAFA sales since it requires a complete release of lien with a capped payment to them of $6,000. In many cases, many second lien holders want or at least will attempt to demand more in the form of cash, continuation of payment or modification of the loan to release the lien to allow a short sale to take place.

Technique...since many are now using a formula based on a percentage, see if it is equal to or below the cap. Negotiate from there.



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