I had clients that purchased a home with me in September of 2008. That was when the Government had a $7500 interest free loan with a 15 year repayment that they were calling a "Grant". My clients are in construction and have been in and out of work here in the state of Arizona and are currently needing to sell the home short or allow it to go to foreclosure.
I had my title company do a title search on the property and HUD has put a $7,711.12 lien on the property.
Has anyone dealt with this before? HUD appears to be a big black hole where this is concerned and it seems that no one I have contacted has even any idea what Im talking about, how to get it remedied or know if anyone whom might have answers. Google hasn't had the answers for me either.
Here are my questions:
1. Who do I contact at HUD that would know how to handle this?
2. Will my clients have to pay the $7500 back if they will not make any money from the sale?
3. Who can release that lien? How long does it take?
Has anyone else run across this yet, and if so... I would sure appreciate your assistance!
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HUD Mortgagee Letter 2008-43 clearly states that HUD will NOT go short. You will have to get your bank's negotiator to use this letter to combat the minimum Net and apply for a variance. You can also use the money that was going back to the sellers for "re-lo" or whatever they call it to apply to the outstanding balance. We've had success with this method, but it is paramount to have a competent person at both the bank and title company to help you out with this. Even though you think it's the same organization going short on themselves, remember that govt agencies do stupid sh*t all day long and often cut off their nose to spite their face. Good luck!!
HUD Mortgagee Letter 2008-43.pdf
I am not aware of any federal home buying stimulus grants (really, gimmicks, but that is for another discussion) that place a lien on the property. Are you sure that this is not a HUD Partial Claim? Does the lien show as HUD? If so, then it probably is a Partial Claim.
FHA is HUD .... To start off with on a normal FHA pre-nego short sale, they allow up to $1500 to 2nd Mortgages. Plus if they close in time they will have an extra $1000 (or $750) that they can apply for non-acceptable HUD/FHA closing costs. (eg. Utilites, Inspections, Home Warranties, Nego Fees, Extra Payoff to 2nd).
Since this 2nd is a GRANT - you will have to look at the specifics of it, yes it is interest free and forgiveable after 15 years, so if there is no equity in the property, I am not sure that they can ask for the full amount, like any other 2nd getting something is better than nothing at all. Get a copy of the document from your title company and review it. The there should be an address on their as to who to contact, it is my guess that it is going to be a local housing authority that you should start with, either in the city or county of the property.
Good Luck, and keep us up-to-date on what you find out.
I also dealt with this same thing. Tanya is correct. I did not have to contact HUD. My short sale went through the FHA short sale Dept and they informed me they would be dealing with the HUD 2nd. and they did!
To my knowledge, HUD never directly gave any buyer a 2nd mortgage. All stimulus money was given out one of two ways. There was the $7,500 IRS tax credit that was to be repayed over a period of time. That would have a lien from the IRS, not HUD if the owner's had not began repayment on it when they should have.
The second possibility is that a 2nd mortgage was granted through a Neighborhood Stabilization Program. Many local NSP's popped up that actually gave out the stimulus money. If that is the case, then the HUD-1 from closing will reflect a $7,500 2nd mortgage that was recorded on title at the time of closing.
If there was not $7,500 2nd listed on the HUD, then it most likely an IRS lien for income taxes.
I had this same situation. HUD would not accept less than the full amount owed. The first mortgage holder would not allow this amount to be paid on the settlement statement at closing because it was in excess of their allowed "guidelines." Eventually, the property went to foreclosure. Make sure you get your answer pretty quickly, or you may end up wasting your time, because my experience is that HUD will not waiver on this amount owed. If your seller can find the funds to pay the +/- $7,700 in advance of closing, maybe they can pay it and have the lien cancelled so it isn't an issue with the first mortgage holder at closing. Good luck!
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We've shorted IRS liens before, but with HUD I'm not sure they'll take short. You may have to put a 100% payoff to them on the HUD and explain it to the 1st that it's the only way to clear the title. In our experience with this some banks will take it others will throw it out and say that seller/ buyer has to come up with it. Would probably help to negotiate HUD first so you know what you're dealing with and can work backwards.
Thanks Brandon. Who do I contact at HUD to start negotiating with?
In our experience, HUD usually never accepts a "short" payoff for these liens. Just so you expect that they might require it be paid in full, although you can always try for a percentage of the amount for lien release or full settlement! If it's an FHA loan, you will most likely have a certain amount alloted for junior liens, but ask for a variance from your negotiator that's handling the 1st lien, sometimes that works. We've gone directly through HUD for the release and payoff letter. Try calling HUD @ 877-622-8525. Fax # for Authorization Forms is 918-236-3274
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