Comment

Comment by Bill Garrett on May 13, 2011 at 8:03am

The very quick response from Darrell Powell at HUD to my question about the borrower having to particiate in a modification before being eligible for an FHA short sale: 

 

"Sorry, this has always been the guidelines. They don’t try for any particular program they just must verify the mortgagor doesn’t have the ability to afford the payment in addition to their new properties expenses. I know some servicers don’t do it that way, and it’s a very expensive gamble when they don’t. In the post audit they run the numbers and if they have a surplus HUD doesn’t pay the claim and then accesses a penalty usually three times the unpaid principle balance so a $100K has just become a $300K loan they now own and have to sell.

They must verify they do not have a surplus income because the guidelines state (Mortgagee Letter 2008-43, Section D. Financial Analysis),

D. Financial Analysis

Prior to signing Form HUD-90045 (Approval to Participate), the mortgagee must request financial documentation to evaluate the mortgagor’s ability to support the mortgage debt. The PFS option may not be offered to mortgagors who have sufficient personal resources to pay off their mortgage commitment.

The mortgagee may prescribe the form that the mortgagor must use to submit its financial information. Mortgagors may provide financial information during a telephone interview, electronically, via the regular mail, or in person. Regardless of how the mortgagor’s financial information is obtained, the mortgagee must independently verify the financial information. Mortgagors with surplus income and/or other assets are required to re-pay the indebtedness through the use of a repayment plan.

The mortgagee must analyze the mortgagor’s ability to meet the monthly mortgage obligation by:

• Estimating the borrower’s fixed monthly expenses (e.g., mortgage payment, food, utilities, car payment, outstanding obligations, etc.);

• Estimating the borrower’s anticipated monthly net income (making necessary adjustments for income fluctuations); and

• Subtracting expenses from income to determine the amount of surplus income available each month.

If the mortgagee’s evaluation indicates that the mortgagor is not eligible for a PFS or another loss mitigation option, the mortgagee must immediately advise the mortgagor of this decision in writing, explaining the reason for denial and giving the mortgagor at least seven calendar days to respond.

Who are you working with at Bank of America? They could run the financials real quick and determine this but yes, they must verify they don’t have a surplus income."

Comment by Kevin - Greenville, SC on May 13, 2011 at 7:26am

Here is a great site for Loss Mit news and guidelines Servicers 'must' follow.

 

http://www.fivealerts.com/index.php?option=com_content&view=fro...

 

Comment by Sharmayne Darzell Ballard on May 13, 2011 at 7:16am

Kevin, I did not ask for a copy  - should have - figured I'd find it on HUD website, but as you have noted, 'nothing new' there.

Comment by Bill Garrett on May 13, 2011 at 7:08am

I have sent Darrell at HUD an email and also sent an email to a reliable contact in the FHA department at BAC.  I will post the responses. 

If true that there's a new procedure requiring the modification, that could have a huge (and negative) impact on this process. 

 

Thanks to all for the quick responses.

Comment by Kevin - Greenville, SC on May 13, 2011 at 7:04am

Sharmayne,  Did you ask to get a copy of this 'new' directive BAC said was issued?

 

Comment by Kevin - Greenville, SC on May 13, 2011 at 7:03am

don't see anything new - http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sf...

Comment by Elva Branson-Lee on May 13, 2011 at 6:57am

Bill, your client doesn't HAVE to go through Loan Mod, but BAC may have to offer it.  The borrower can simply state that they don't want it. That's my understanding.

Comment by Sharmayne Darzell Ballard on May 13, 2011 at 6:56am

I heard the same yesterday from BAC on newly submitted FHA PFS request.  BAC rep said it is new HUD directive effective 5/2011 and they must review all FHA short sale requests to "evaluate for HAMP-type modification - if a loan mod is offered the borrower MUST accept and make those payments or it will be foreclosed with no short sale option - short sale will only be an option if they do not qualify for loan mod"

Comment by Kevin - Greenville, SC on May 13, 2011 at 6:55am

Bill,  

I'm almost 100% positive BAC is wrong, but run this up the ladder with Darrell - [email protected]

Comment by Bill Garrett on May 13, 2011 at 6:43am

I have a pending FHA SS with BAC.  The BAC guy recently assigned to the file tells me the borrower must first try the modification program before being eligible for the SS program.  Our borrower does not want a modification; he wants to do a SS.

 

I have done dozens of FHA short sales with BAC and have never been told that the borrower must first go through the modification program.  Have I just been lucky?  Is this some new procedure?  Is the guy at BAC perhaps mistaken?

 

Thanks.

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