HUD rules for FHA short sales, tips, experiences, etc.
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FHA contract clause
"Sale is contingent upon the seller receiving prior written approval of Insert Name of Lender/Servicer."
Listing agreement clause
Seller may cancel this agreement prior to the ending date of the listing period without advanced notice to the broker and without payment of a commission or any other consideration, if the property is conveyed to the mortgage insurer or the mortgage holder.
Q. Is there anything in Mortgagee Letter 2008-43 that would prohibit an Agent that represent's both Seller and Buyer from collecting the full 6% commission in a PFS?
A. Max commission is 6%, servicer is to follow state law on how commission can or cannot be paid.
Source:
Matt Martin
Program Director, Loss Mitigation
U.S. DHUD
National Servicing Center
301 NW 6th Street, Suite 200
Oklahoma City, OK 73102
National Servicing Center: (877) 622-8525
Loss Mitigation Results- "The dual goals of the FHA Loss Mitigation Program are to help FHA insured borrowers avoid foreclosure and to minimize losses to our Insurance Funds."
Laurie Maggiano
April 11, 2008
Important Update:Bank of America is offering some HUD borrowers an additonal $4,000 in relocation assistance.
When your seller has an FHA mortgage on their home, these are the guidelines . The homeowner should go ahead and apply and send in the complete financial package required by the bank to the bank or servicer when the listing is taken (or even before if possible). An appraisal will be done by an FHA certified appraiser.
When the appraisal comes in and the short sale package is approved the bank will issue a HUD-90045 which will list the price that the home should be sold for. This listed price on the HUD-90045 Approval to Participate will reflect 88% of the appraised value, so depending on the length of the marketing period this price will decrease to a floor of 84% of the appraised value.
When a contract comes in, as long as it meets the details in the guidelines (net proceeds, closing costs, etc.) , it should be approved. The guidelines only give the bank 5 working days to review the contract for sale if the seller has already been approved for the program. (Caution: Allow more time than this for the lienholder approval in your contract because this is not always followed!)
The bank is not allowed to accept an offer that does not meet the minimum allowable thresholds. Important Note: The marketing period for purposes of the net proceeds calculation does not start until the Approval to Participate (HUD-90045) has been issued!
Rules issued by HUD 12-24-08 for the FHA Preforeclosure Sale program. The rules outline net proceeds, acceptable closing costs, payment of liens, etc. :
08-43 PFS Program guidelines issued 12-24-08.
Most people don't realize this little caveat - In addition to the standard four-month period to market HUD properties sold under a pre-foreclosure sale, Tier 1 lenders receive an automatic extension of two extra months to market those properties. Bank of America, Wells Fargo and Chase along with some others are currently Tier 1 lenders.
http://portal.hud.gov/hudportal/documents/huddoc?id=trs45rp4.pdf
Net Loss on Claims
The net loss rate on claims remains high in the current economic environment, but it is
in-line with actuarial projections made at the start of the fiscal year. Net loss rates on
foreclosure cases are comparable to where they have been over the past year. FHA’s
overall loss rate continues to benefit from strong preforeclosure (short) sale activity as a
default resolution tool. Preforeclosure (or, short) sales result in a lower net loss per claim than if a loan were to otherwise go through the entire foreclosure process and HUD then manage and sell the property. In this quarter HUD paid claims for 4,072 preforeclosure sales, up from 2,714 in the year-earlier period. That increase represents more than a 2 percentage point change in share of all claim payments, from 12.3 percent one year ago to 14.4 percent in FY 2011 Q1
This final rule amends HUD's civil money penalty regulations to reflect HUD's authorization to impose treble damages on a mortgagee for any mortgage for which the mortgagee had a duty but failed to engage in appropriate loss mitigation actions. The final rule follows publication of a proposed rule, takes into consideration the public comments received on the proposed rule, but makes no changes at this final rule stage.
Section 230(a) of title II of the NHA, as amended, makes it mandatory for the mortgagee, upon the default of a single family mortgage, to engage in loss mitigation actions (including, but not limited to, special forbearance, loan modification, and deeds in lieu of foreclosure) for the purpose of providing alternatives to foreclosure.
Application to Participate: FHA Application and Financial Form
HUDs Information Disclosure Form (HUD-90035) HUD 90035-Information Disclosure.pdf
Supposedly the 90035 was updated when the new rules were issued in 12/08 to incorporate both 90035 and 90036 but I have not been able to find an updated 90035. I just submitted the application 90036 on my last FHA short sale and didn't have a problem.
Other HUD resources for FHA PFS program:
PFS Fact Sheet (revised 6-22-11)
PFS Program FAQs
SAMPLE HUD--90045.pdf
FHA Appraisal dispute guidelines_new.pdf
Allowable and Non-Allowable PFS Fees
Lender Short Sale Packages
Bank of America FHA Short Sale Welcome Package
https://www.myauroraloan.com/docs/Aurora_FHA_Package.pdf
Started by Brenda Mullen. Last reply by Kevin - Greenville, SC on Thursday. 1 Reply 0 Likes
Started by Chad Gelsinger. Last reply by Celeste ODea May 8. 1 Reply 0 Likes
Comment
Comment by Kevin - Greenville, SC on Thursday There is no need to provide a Preliminary HUD-1 at the time of issuance of the ATP if there is no Buyer as that's not what the #'s on the ATP are based upon.
Comment by Jim Schneider on May 21, 2012 at 12:30pm Interesting twist. Bank of America, FHA loan, waiting for the ATP but we do have a buyer. Since we pro-rate taxes back to the buyer in Illinois, and didn't have the buyer's closing costs on the pre-liminary HUD, it showed that money was going back to the buyer at close. The negotiator said we needed line 303 to be marked as money "FROM" buyer. This wasn't hard in our case, we had the buyer's lender provide the GFE and once closing costs were on the HUD it shows money from the buyer.
Question is- if we were getting the Approval to Participate BEFORE we had a buyer, what then? Put in rough estimates of a hypothetical purchasor? I'm not sure, but I'd love to have the answer before I run into that problem.
Comment by Kevin - Greenville, SC on May 13, 2012 at 11:09pm Kris,
Find someone at the Servicer level who will submit the variance request. If they still wont, contact HUD. HUD approves these all day long.
Comment by Kris Lindahl on May 13, 2012 at 11:06pm I am wondering if anyone can give me some advice on a FHA short sale with quicken loans. The buyer is requesting 3% seller paid closing costs. The negotiator is saying they will only allow 1% seller paid cc. I requested that she submit it to HUD for a variance and she told me she will not do that. It was my understand they need to submit to HUD for variances. The 2% difference will kill the deal. Should I go directly to HUD? If so, who should I contact?
Any insight would be helpful!
Comment by Kevin - Greenville, SC on May 9, 2012 at 6:38pm Pre-Foreclosure Sale Introduction
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. This option is appropriate for mortgagors whose financial situation requires that they sell their home, but they are unable to do so without FHA relief because the gross recovery on the sale of their property (i.e., sales price minus sales expenses) is less than the amount owed on the mortgage. Source: Mortgagee Letter 2008-43
Comment by Michael Schneider on May 9, 2012 at 6:18pm @Pat. From ML 08-43 (this is all you get, as far as I know)
Mortgagors, acting in good faith, who successfully sell their properties using this option are relieved of their mortgage obligation
Some servicers will add explicit waiver language in the demand.
Comment by Pat Hood on May 9, 2012 at 2:57pm Question on approved PFS sale. GMAC letter silent on deficiency. Darrell Powell has not responded to my question regarding deficiency. Mortgagee letter 94-45 states"Mortgagors determined to be eligible for and who participate in the pre-foreclosure sale procedure are not to be pursued for deficiency judgements."
Does this statement of policy, along with approval letters protect my client or need something more? In Arizona..non-recourse for purchase money.
Comment by Julissa Jumper on May 3, 2012 at 11:24am I just had t o fax a LOA to HUD and the fax number they gave is: 469-647-4451. The number above on the group page is outdated.
Comment by Jim Stewart on May 3, 2012 at 10:43am Diane, what lender where you dealing with? Other than pictures what did you send to the lender to get them to lower the price?

Comment by Diane Donnelly on May 3, 2012 at 10:31am I had the same problem. I took pictures of the structural damage and had an engineer go out and give a quote. I got the price from 225k to 127k due to the foundation.
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