According to our in-house attorney and from what we've read from NAR, it appears that the borrower must be considered for HAMP prior to being considered for HAFA. If a borrower requests HAFA off the bat, the servicer must first run them through HAMP - even if the borrower doesn't want to keep the house. They must offer them the modification if they qualify for it. NAR's publications states as follows:
Servicers must consider HAMP-eligible borrowers for HAFA within 30 days after the borrower does at least one of the following:
o Does not qualify for a HAMP trial period plan.
o Does not successfully complete a HAMP trial period plan.
o Is delinquent on a HAMP modification (misses at least 2 consecutive payments).
I do agree that there is a lot of confusion on HAFA - and in my office, we have all come to the conclusion that we can interpret the guidelines all we want to, but ultimately the servicers are going to have their own interpretation and implement accordingly. In sum, it is going to be a trial and error kind of thing, as is just about everything in real estate.
And I do agree - the investor and the second would likely ruin my sellers' chances anyway. Fortunately, my seller thinks so too and we are carrying on with our "traditional" short sale.
It also says that these are "guidelines" and its up to the bank how they want to implement the program, leaving too much room for their own interpretation.
Actually your WF person was wrong on HAFA qualifications. One does not have to go through HAMP. A seller can request a short sale right off the bat. Review the HAFA guidelines and you will see this in addition to the other items.
Personally if you have a short sale in process it makes no sense to switch to HAFA (IMHO). Between investor and seconday lien fallout it would probably not come together anyway.
I think that anyone who sees this as a "be all,end all" is blindly optomistic. This is just one tool in the shed so to speak.
But it has drawn major attention to short sales and with BOA ramping up their short sale department I do see good things even if indirect.
If a regular short sale is available, I would seriously consider it. Unless you are dead sure the situation will fit HAFA perfectly (ie. one loan, servicer is also lender, etc.)