Hey Darren! We have had 5+ files closed out with FHA due to extreme delinquency. They are cracking down big time on 36+ month behind accounts and so far, it has killed all the deals despite numerous escalations to HUD, we even spoke to a director over there.
I have spoke to HUD as well. They tell me nothing can be done and that a short sale is for people who just become late and that the borrower shouldn't wait til they are 75 months past due to do a short sale. One day HUD will wake up and realize they are doing everyone an injustice and costing the servicers and everyone else a lot of money
BSI is terrible to deal with. There short sale process is easy, but when it comes to value, they set their own prices, worse than Fannie Mae.
You may have already got this under control but should you ever need any assistance with an FHA short sale , contact Novad Management Consulting to open up a HUD ticket. From My experience there is nothing that can be done to get past the 40 month late rule unless the servicer agrees to a claim block.
Back and forth with FHA for years (yes, years - seven to be exact including bankruptcy, litigation and letter to CEO and all officers of lender); last go 'round they gave me a value which was way over the real value of house; after I objected, they said they would need to do another BPO because old one stale; waited and waited; wrote and called inquiring when BPO; one week after my inquiries, email comes saying "Borrower no longer fits FHA requirements and delinquency was too long"; we went to steps to purchase and paid less than short sale offer.