FHA short sale with tenant in the home

I have clients that bought another home last year and moved due to daughters health condition. They rented their original house in Oct of last year and tenants have been there since. My clients were $700/mo negative on the rent/pmt ratio but still stuck it out until he lost his job. They've burned their savings and need to shortsale. B of A is telling them the house MUST be vacant to qualify for ANY loan assistance, including short sale. Any one have any experience with this type of situation? Also, the property was claimed as an "investment" on their 2011 taxes. Will this affect their approval? Any advice is greatly appreciated. Thank You.

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Permalink Reply by Barbara D on October 25, 2012 at 11:01am

As long as they have tenants they will not allow the short sale. Also if they have had tenants for more than 18 months they cannot approve.

Permalink Reply by Lacy Williams on October 26, 2012 at 7:59am

Hi Barbara,

Thanks for the response. They're ready to vacate the tenants but I didn't want to advise them to do so if FHA wouldn't work with them at all. But the tenants have only been there 12 months so they should be fine.

Thanks again!

Permalink Reply by Kevin - Greenville, SC on October 26, 2012 at 4:24pm

There is nothing in FHA PFS Guidelines that specifically prohibits a PFS with Tenants in Property.  

Here is the actual HUD Guideline - "Mortgagees are authorized to grant reasonable exceptions to non-occupant mortgagors seeking relief through Preforeclosure Sale (PFS), or Deed-in-Lieu of Foreclosure (DIL) when it is clear that the subject property was not purchased as a rental investment, or used as a rental for more than 18 months. Justification for the above exceptions must be documented in the claim review file."

This just means Bank of America can't approve without a variance from HUD and there is still a possibly your Client(s) would qualify for the Pre-Foreclosure Sale.

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