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HAFA Prevents 22,000 California Foreclosures

Foreclosures cancelled in California due to the government’s short sale program, Home Affordable Foreclosure Alternatives (HAFA), and other programs reached an all-time high last June, totaling almost 22,000 and more than tripling over the year.

According to online tracker Foreclosure Radar, the figures are 27% higher than the previous month and a 153% increase from June 2009. The cancellations are believed to be driven by an increased demand in short sales following the launch of HAFA.

Other common causes of foreclosure cancellations are successful loan workouts (such as loan modifications), deeds-in-lieu of foreclosure, and legal requirements. Filing errors also account for a small percentage of cancelled foreclosures.

JPMorgan Chase cancelled the largest number of foreclosures in the state, although the New York-based lender says it has not changed its policies or taken any steps to reduce foreclosure sales.

Foreclosure Radar explains that some of the cancellations were actually short sales or loan modifications awaiting approval, although a number of borrowers and realtors have reported cancelled foreclosure sales that ended up neither in a modification or short sale.

However, the company’s researchers agree that the HAFA program played the biggest role in preventing foreclosures. The program, launched in April 2010, offers incentives to lenders to encourage them to grant short sales and deeds-in-lieu rather than foreclosing.

A Foreclosure Radar researcher said that having a system in place and a streamlined process has shortened the short sale wait time. This, he explained, allowed more loans awaiting foreclosure to beat the deadline and complete a short sale instead.

Foreclosure activity fell in May, just after HAFA was introduced, but went up 6.7% in June. A new surge of distressed homes is expected later this year as those who have failed to get loan modifications prior to HAFA go into foreclosure.