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Borrowers will be eligible for the Foreclosure Alternative Program (part of the Making Home Affordable Program) if they meet the minimum eligibility criteria for a Home Affordable Modification but did not qualify for a modification or were unable to sustain payments under a trial period plan or a modification.
Prior to proceeding to foreclosure, participating servicers must evaluate each eligible borrower to determine if a short sale is appropriate. Considerations in the determination include property condition and value, average marketing time in the community where the property is located, the condition of the title including the presence of junior liens and a determination that the net sales proceeds are expected to exceed the investor's recovery through foreclosure Incentive Payments.
Under the program, lenders and servicers are required to use standardized documentation, including a Short Sale Agreement and an Offer Acceptance Letter, which outlines the homeowner's obligations to market the home, describe the rights and responsibilities of all parties and establish clear timeframes involved in the short sale process.
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