Short Sale Late Req’d/FHA

 

Federal Housing Authority (FHA)

Documentation found to determine if late payments required by FHA directly. However, lenders and servicers may have additional overlays that apply.

December 24, 2008                                                                Mortgagee Letter 2008-43 

SUBJECT: Pre-Foreclosure Sale (PFS) Program – Utilizing the PFS Loss Mitigation Option to Assist Families Facing Foreclosure

To participate in the program, mortgagors must be willing to make a commitment to actively market their property for a period of 3 months, during which time the mortgagee delays foreclosure action. Mortgagors who successfully sell to a third party within the required time may receive a cash consideration of up to $1,000. (pg.5)

A PFS sale must be an outright sale of the property. If a foreclosure occurs after the mortgagor unsuccessfully participated in the PFS process in good faith, neither the mortgagee nor HUD will pursue the mortgagor for a deficiency judgment. (pg.5)

  1. Loan Default

At the time the PFS closes, the loan must be in default (i.e., delinquent more than 30 days). Mortgagees may exercise their discretion to accept applications from mortgagors who are current but facing imminent default. However, by the date the PFS settlement occurs, the loan must be in default. (pg.5)


 July 9, 2013                                                                               Mortgagee Letter 2013-23

Subject: Updated Pre-Foreclosure Sale (PFS) and Deed in Lieu (DIL) of Foreclosure Requirements

Imminent Default for Standard PFS Transactions Only

Owner-occupant mortgagors may be considered for a standard PFS if they are current or less than 30 days past due on the mortgage obligation and can clearly demonstrate that they are at risk of imminent default due to one or more of the following hardships:

 A loss of or reduction in income that was supporting the mortgage loan;

 A change in household financial circumstances;

 Death of a co-mortgagor;

 Long-term/permanent illness or disability of a mortgagor or dependent family member;

 Divorce or legal separation of a mortgagor; or

 Distant employment transfer/relocation greater than 50 miles one-way from the mortgagor’s current primary residence to be closer to employment.

When approving a mortgagor for a standard PFS based on the mortgagor’s imminent default, the mortgagee’s servicing file must include the following:

 evidence of the mortgagor’s imminent default hardship(s); and evidence that the DIT results in a negative value.(Pg.3)


Reporting to Credit Bureaus

Mortgagees must not report PFS or DIL transactions to credit bureaus as foreclosures. (pg.7)