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FHA Short Sale |
FHA Short Sale may refer to one of the several programs that a lender has put in place in order to avoid foreclosures on FHA-insured loans. It may also refer to the HUD policy on whether or not a borrower is eligible for a second FHA mortgage after he or she has sold the previously owned property through a short sale. The following paragraphs are an attempt to explain these implications in an easy-to-understand manner.
FHA Short Sale Guidelines
When we talk about the FHA short sale as an alternative to a foreclosure, it is up to the lender as far as the approval for the same is concerned. Usually the loss mitigation department of the lending institution handles issues related to a short sale process. You must talk to an official of this department to discuss your issue and work out a solution.
The loss mitigation department may even help you keep your home if you qualify for a loan modification, short refinance, partial claim or any other program. If however a short sale is the only option left you must obtain approval from the lender to begin the process. The approval is valid for a period of 90 days only and one must sell the property within this period.
Sellers are paid incentives as well to meet other payment and relocation requirements. New buyers using a new FHA loan to buy your property will have to pay only one percent of their loan amounts towards the closing costs. An FHA appraisal must proceed before you could be allowed to participate in the HUD pre-foreclosure (short sale) program. As far as the deficiency judgment is concerned, it all depends on the lender’s discretion.
FHA Short Sale and Buy
The Mortgagee Letter 09-52 sets out policy details on buying a new home after the previously owned property is sold through a short sale agreement. If the property was sold with an aim to take advantage of the declining market conditions or buy a similar or superior property within a reasonable commuting distance at a reduced price, new FHA mortgage will not be available to the borrowers.
However, borrowers may be eligible for new FHA loans if they were current on their mortgage at the time of short sale and the proceeds from the transactions were used to make the payment in full. The rules regarding the borrowers who were in default at the time of short sale impose a waiting period of at least three years from the date of the pre-foreclosure sale. Exceptions to these rules may exist and may vary from one lender to another.
For more information and resources like forms & other application details and mortgagee letters, visit the website of the US Department of Housing and Urban Development. For a complete short sale package contact the loss mitigation department of your servicing lender or call the National Servicing Center at 1-877-622-8525. You can also email to Hsglossmit@hud.gov.
Website: www.hud.gov
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