Category Archives: HAFA

“Arm’s Length Affadavit” on a Short Sale

It’s important that anyone considering the need or desire to short sale their property know what the “Arm’s Length Affadavit” document is.  Most banks will require this form to be signed at some point in the process of approving the short sale terms and/or at closing.  In most cases the real estate agents will be asked to sign right along with Mr. Buyer and Mr. Seller.  Holding your breath and hoping it doesn’t appear is not recommended.

The form will vary by lender but the guts of it will be the same.  In order to get your short sale approved all parties involved will have to agree in writing that

A.  The Seller will not remain in the home.   Period.  

B.  The Buyer and Seller do not have any type of prior relationship.  Meaning mom and dad can’t buy your house at a great price.  Neither can your business partner or your brother, or…well you get the picture.

C.  The Seller will not profit in any way in the sale.  No cash changing hands on the side.

D.  The Seller will not regain ownership of the home at a later date.  A family member can’t buy your house and then give it or sell it back to you.

Clearly this is a form that has brought about heated debate in real estate and legal circles (whether it is legal, if and how it could be enforced, etc.) however it remains an issue on most short sales.  This is not an inclusive list but a variation of what we’ve seen in the forms.  Each bank has their own form with their own terms.  This is not intended to be legal advice, it will be up to the parties involved in each transaction what they will or won’t sign.  Some of the banks do not have this form at all.

For more information about short-selling your Temecula Valley home please email us at and request a free copy of our “Short Sale Report”.

Who Might Qualify For HAFA?

 The Home Affordable Foreclosure Alternatives (HAFA) Program is a government sponsored program that allows borrowers (homeowners) that are in financial trouble to avoid foreclosure either through a short sale or a deed in lieu of foreclosure. The program is designed to be implemented either after the HAMP loan modification has failed or (as recently amended) is in process as an option to sale. There are different guidelines to the program dependant on whether or not your loan is a Fannie Mae/Freddie Mac or a non government sponsored enterprise (GSE). The combination of these holders equates to more than 90% of the home loans out now so it is a program that should continue to grow in success as servicers and real estate professionals embrace and help implement it for their clients. The program not only offers up to $3,000 in relocation funds to the borrowers on a successful closing but also provides financial incentives to the servicers and first lien investors for their cooperation.

Overview of the basic guidelines for eligibility is as follows:

  • The property must be your principle residence. Property can be vacant or rented up to 12 months prior to the Short Sale Addendum(SSA), as long as you can prove that it was your primary residence and that you have not purchased a 1-4 unit family property in those 12 months.
  • The mortgage loan is a first lien originated on or before January 1, 2009.
  • The mortgage is delinquent or default is reasonably foreseeable.
  • The current unpaid principle balance is $729,750 or less. (Higher amounts apply to 2-4 unit properties).
  • Borrower must be able to sign a Hardship Affidavit (or in some cases write a Hardship Letter explaining the circumstances of financial distress).
  • Your lender has agreed to be a part of the HAFA/HAMP program.
  • You have to be able to provide clear and marketable title.
  • You have to sign an “arms length transaction” affidavit.

    Investors are allowed to implement their own standards in addition to these so it is impossible to detail every possible scenario.

 Overview of the basic incentives of the program is as follows:

  • An option to foreclosure becoming a part of your permanent history.
  • Uses a standard process, documents and timeframes.
  • Servicer must reply to an executed contract within 30 days.
  • Provides financial incentives of up to $3,000 for your relocation.
  • Requires you to be fully released from future liability for the first mortgage debt and if a subordinate lien holder receives a payment from the first lien holder to enable the transaction, that debt as well. (Forgiven debt could have tax and credit rating impact…you are advised to seek financial and tax advice from a professional.)

So in a nutshell it appears to be a great program that the majority of homeowners facing financial difficulty will at the very least need to be considered for. Please consult with a professional Realtor in your area about your circumstances and the current value of your home for information detailed to your situation. You will be advised to seek legal advice since a short sale is not always in the best interest of every homeowner. If you live in Temecula, Murrieta, Wildomar, Lake Elsinore, Menifee or Winchester that professional Realtor is us! We’d love to talk with you about your situation and see how we can help. April (951) 522-0518 or Gary (951) 522-6308 or email us at

Tarbell Realtors is not associated with the government and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.