Home Affordable Foreclosure Alternatives (HAFA) is designed as an incentive to borrowers and lenders for one main purpose – to avoid foreclosure. Taking effect this April, HAFA lasts until the end of the year and provides dollars in funding for homeowners who have an unpaid principal balance no more than $729,750 or monthly mortgage payments exceeding 31% of gross income.

HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks. HAFA is a complex program, with 43 pages of guidelines and forms, designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure, as the link above explains.

The new program helps facilitate short sales by pre-approving short sales terms before listing the property (including the minimum acceptable net proceeds). Banks have been getting a lot of business through short sales, which have increased to 15.9% of house purchase transactions this January.

The government perks dished out since last October for housing issues have extended to provide affordable mortgage for thousands and even renters are being given a chance to receive help. HAFA is just the newest section of the Home Affordable Modification Program (HAMP).

“These initiatives are critical to helping working families maintain access to affordable rental housing and home ownership in tough economic times,” said Treasury Secretary Tim Geithner.