The Home Affordable Foreclosure Alternatives program, which is part of the Obama Administration’s Making Homes Affordable program, has been extended one year and now covers rental properties.

Launched in 2009, HAFA was designed to help distressed homeowners avoid foreclosure and includes a $3,000 relocation incentive for the seller. It also ensures that the outstanding loan balance is forgiven. Now, HAFA was predicted to help millions, but has only been used on about 40,000 short sales. The Jennifer Young Homes team has closed numerous HAFA short sales, each one with its system snags…but a great program all around. Here are the details of HAFA updates:

The U.S. Treasury Dept. on March 9 and April 17 issued Supplemental Directives 12-02 and 12-03, which included wide-ranging changes to the program “in an effort to continue to provide meaningful solutions to the housing crisis.” The changes, which took effect June 1, include:

EXTENSION: The HAFA program has been extended through 2013. To be eligible, an initial package must be submitted on or before Dec. 31, 2013, and the transaction must be closed on or before Sept. 30, 2014.

OCCUPANCY: The program is now available on investment properties. Previously, HAFA guidelines required that the applicant occupied the property as a primary residence, though they still qualified if they had moved out within the previous 12 months.

RELOCATION INCENTIVE: It remains at $3,000, but the incentive will only be paid to: Owner-occupants, Tenants who will be required to vacate after the sale, The borrowers’ legal dependents, parents or grandparents who live in the property rent-free, and who will relocate.

Investment property owners are not eligible for the incentive.

JUNIOR LIENS: The amount allowed to pay off a junior lien, such as a second trust deed, has been increased to $8,500 from $6,000.

Note: The HAFA program has often been rejected because the junior lienholder was unwilling to accept $6,000 payoff because it was less than 10% of outstanding balance. Though the new $8,500 limit is a greater incentive for junior lienholders, HAFA still may not be viable for homeowners who have large home-equity loans.

MILITARY DEPLOYMENT: Owner-occupancy guidelines have been expanded to include active military members who have been deployed or forced to relocate for service, as long as the home was their primary residence, they plan to move back in after their service is completed, and the home is not occupied by a tenant.

MORTGAGE LATES: Homeowners do not have to be delinquent on their payments to apply. And the homeowner can elect to make full payments during the short sale process, in order to stay current on their loan.

***The Treasury’s version of the HAFA program does not apply to all mortgages. Loans owned, insured or guaranteed by Fannie Mae, Freddie Mac, FHA, VA or the Rural Housing Service are not eligible for this program.

***Fannie Mae and Freddie Mac have their own versions of the HAFA program, and they have not adopted the frequent updates along with the Treasury.