Need Some Advice on a BofA FHA Loan

I have a client whose house I listed a few weeks ago.  I sent in all the documents to BofA for them to start the Pre Foreclosure approval process.  I talked to the person at BofA who told me that my clients had been approved for a traditional loan modification because they were more than 12 months past due.  The person at BofA said that because my client declined the traditional loan modification, they cannot participate in the FHA Short Sale and will be heading towards foreclosure, and there is nothing that can be done because they qualified for a traditional loan modification (which they were offered) and they not only declined it but did not send in the first payment.  According to the BofA counselor, there is nothing for this client to do, other than try to sell their house for enough money to pay off what BofA is owed, which is significantly more than the house is worth.  Is there anything that can be done to help these clients?  Any suggestions would be greatly appreciated.  Thanks.

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Replies to This Discussion

Permalink Reply by Caroline Simmons on February 7, 2013 at 10:02am

Barbara, try calling the FHA National Service Center at 877.622.8525 for assistance.

Permalink Reply by joe beauchamp on February 7, 2013 at 11:09am

FHA does have some screwy rules, like if you stop maintaining the property, they will refuse to do a short sale. So, they'd rather have it go to sheriff sale in 2 to 3 yrs, pay taxes in the meantime and get back a pile of rubble than sell it to a willing buyer. Yes, I have had this situation - they don't care if the net can be met.

Perhaps the FHA underwriter made a mistake - does the seller really make enough that a loan mod makes sense? You can talk to the CRM, too. Get the facts.

Also, a loan mod is not allowed if the property is vacant, so your seller moving out and then discussing a loan mod with the CRM should get you out of this fix. I don't know if that applies to a tenant being there - that might be another way out.

Permalink Reply by Kevin - Greenville, SC on February 7, 2013 at 1:08pm

1. How do I start the FHA short sale process with Bank of America?
Coordinate with the homeowner to contact their Customer Relationship Manager
(CRM) to initiate an FHA Preforeclosure Sale (“short sale”). If the homeowner
does not have an assigned CRM, the homeowner should call 1.800.669.6650
to initiate the FHA short sale process. Agents cannot initiate FHA short sales
in Equator. (Note: Per the Mortgagee Letter, if the homeowner has not yet been
reviewed for a modification, they will need to complete the modification review
process before being considered for a short sale.)

https://agentresources.bankofamerica.com/content/document/ss_FHApre...

Permalink Reply by Kevin - Greenville, SC on February 7, 2013 at 1:14pm

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. HUD’s home retention alternatives such as Special Forbearance, Mortgage Modification, or Partial Claim must first be considered and determined unlikely to succeed due to the mortgagor’s financial situation.

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Permalink Reply by Kevin - Greenville, SC on February 7, 2013 at 1:29pm

Option Priority


 • Special forbearance

• Loan modification

• Partial claim

• FHA–HAMP

• Preforeclosure sale

• Deed‐in‐lieu of foreclosure 

For the same goal of minimizing loses to HUD’s insurance funds, pre-foreclosure sale (“PFS”) is preferable to a deed in lieu (“DIL”) of foreclosure. In most cases mortgagors are expected to attempt to market the collateral property under the PFS program prior to acceptance of a DIL by the mortgagor.

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Permalink Reply by Kevin - Greenville, SC on February 7, 2013 at 1:33pm
Permalink Reply by Kevin - Greenville, SC on February 7, 2013 at 2:49pm

Reading over your post again I believe Bank of America is right (rare I know).  If the Loan Mod offered makes the House affordable then they probably will not be allowed to participate in the PFS Program.

The goal is to keep the Homeowner in the Home.

Permalink Reply by Kevin - Greenville, SC on February 7, 2013 at 7:27pm

Mortgagees must maintain supporting documentation to demonstrate that a comprehensive review
of the mortgagor’s financial records was completed, and that the mortgagor did not have sufficient
income to sustain the mortgage. Under no circumstances shall the PFS option be made available to
mortgagors who have abandoned their mortgage obligation despite their continued ability to pay.

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