Hey everyone. I just received a short sale approval on a Chase FHA loan. I do not see anywhere in their letter that this is a full release and satisfaction including a waiver of any future deficiency balance. Do they usually stipulate that in the letter? I've already sent a message to my negotiator about it but was just wondering your experience.

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I have had the dis-pleasure of working only two with Chase and they refuse to put the language in - they would rather foreclose and they did...if anyone else has had success I invite your suggestions!

Susan, It's a given with an FHA PFS - 

Pre-Foreclosure Sale:  In cases where the borrower is unable or unwilling to maintainownership and the market value of the property is less than the level of debt, this option allows borrowers to sell their property and apply the proceeds to retire the debt.  Any debt inexcess of the sales proceeds is forgiven.  This process generally is preferred by borrowers because a foreclosure generally has more serious consequences for their credit rating.

 

http://www.abtassociates.com/reports/20007197399621.pdf

Susan. If this was a FHA PFS sale then there will be no deficiency because the lender is reimbursed by HUD for the difference between what they receive through the sale and what is owed including past due interest and costs. Even if the borrower attempts the PFS and fails, due to no fault of their own, and the orperty is forelcosed on the lender and HUD will not go after a deficiency.

 

Mortgagee guidelines are attached.

Attachments:

Thanks Kevin & Bryant,

 

That was my 'assumption' as well however the letter does not have the verbiage. Wonder why?

Deidre,

 

Were yours FHA loans?


Deidre St. Romain said:

I have had the dis-pleasure of working only two with Chase and they refuse to put the language in - they would rather foreclose and they did...if anyone else has had success I invite your suggestions!

All,

 

Just in case anyone else ever wants this clarified here is what the negotiator at Chase told me just now. He said that HUD will not allow them to add that verbiage into their letter but that any deficiency is absolutely waived so long as the short sale closes as per their approval letter. He also mentioned that I could have my sellers call HUD directly to get the information 866-449-1661. Just figured I'd pass along this information in case anyone else searches this exact issue again.

Thanks for starting this discussion, that is applicable to my questions too with an FHA short sale.

 

One twist on mine: there is a 2nd mortgage too. The second mtg holder seems willing to release the lien for the nominal payout Chase gives ($1500) and the $1,000 FHA seller incentive the seller is willing to sign over to the 2nd mortgage holder. Can the 2nd mortgage holder still go after the deficiency on this, even though the 1st mortgage holder can't due to FHA PFS guidelines?

 

Additionally, if it is allowed to go into foreclosure, can the second still go after a deficiency after foreclosure?

 

It would seem really odd if the 2nd winds up with more rights and ability to burden the seller than the first mortgage holder.

I just got off the phone with a Chase rep and they said HUD will not waive deficiency. The waiving of deficiency as noted in the program guidelines is only applicable to owners that didn't sell under the PFS program and were foreclosed upon. Does anyone know if they are actually going after former homeowners after successfully completing the PFS? I don't understand why they would waive due to foreclosure but not when the owner is actually trying to do the right thing and short sale it.

Richard,

 

According to the Program Director (Matt Martin) of The National Servicing Center at HUD they won't pursue if the Borrower in good faith participated in the PFS program, whether it was successful or not.

Update my sellers were sent a letter from Chase attempting to collect this balance! I called the HUD hotline and they advised that under this program the servicer can only go after investors and not private individuals who were occupying the home. They provided a toll free # for my seller to call to open a complaint. The # is 877-622-8525.

Thank you for the update Susan.  I have sold several homes through PFS and have not yet had this happen, but wouldn't be surprised if it did.  Thank you again for the information.

Pre-Foreclosure Sale:  In cases where the borrower is unable or unwilling to maintainownership and the market value of the property is less than the level of debt, this option allows borrowers to sell their property and apply the proceeds to retire the debt.  Any debt inexcess of the sales proceeds is forgiven.  This process generally is preferred by borrowers because a foreclosure generally has more serious consequences for their credit rating.

 

http://www.abtassociates.com/reports/20007197399621.pdf

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