I have a BofA short sale... We just got the approval letter.
However, we cannot figure out where it waives the deficiency. When I ask BofA they point to a sentence in the FHA Mortgagee letter from 12/24/2008 that waives a deficiency in event of Foreclosure but not for the short sale.
My seller is refusing to sign until he see's where they waive the deficiency. Does anybody know where they waive the deficiency in a BofA PFS Shot sale?
There is no deficiency with a FHA PFS. The lender/investor is paid in full buy HUD since this is a guaranteed loan.
I have closed many BofA
FHA deals and my experience they will not add any language to the letter. It's also my opinion that it's not needed in this case.
BUT>>> I am not an attorney and I practice real estate in Florida. Your borrower should seek legal advice.
The owner of your mortgage note, the mortgage insurer (if your loan is covered by mortgage insurance), and [INSERT
SERVICER] waive their right to pursue collection of any deficiency following the completion of your short sale and your
debt is considered settled. This short sale transaction will create a deficiency because your total outstanding debt will
not be paid in full from the proceeds of the sale. The deficiency will equal the remaining balance due under the
mortgage note and mortgage or deed of trust, after subtracting (1) the amount of cash proceeds we receive from the
closing of the short sale and (2) any cash contribution that you are required to make at or before the closing.
Regardless of who the servicer is on an FHA loan, HUD guarantees the deficiency. That's the beuty of the HUD PFS as once approved the homeowner has been relieved of the deficiency regardless if it sells or not. Refer to HUD's most recent mortgagee letter December, 2008, 2008-43. This is HUD's policy that servicers are required to follow for FHA short sales. Specifically, it states "
The Pre-Foreclosure Sale (PFS) option allows mortgagors in default (resulting from an
adverse and unavoidable financial situation) to sell their home at FMV and use the sale proceeds to
satisfy the mortgage debt even if the proceeds are less than the amount owed
In case you have not already done so, point out the clause pointed out by Kevin - Greenville, SC on Saturday.
Used the "The Welcome Package" sent and received by the seller from the bank. It should be on page 5.