Short Sale Late Req’d/USDA

United States Department of Agriculture (USDA)

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

Chapter 3. Section C. Noncurable Defaults

Part 1. Pre-Foreclosure Sale

d. Loan Requirements for a Pre-Foreclosure Sale

In order for a loan to be considered for a pre-foreclosure sale, the loan must be in default (delinquent) for more than 30 days at the time the pre-foreclosure sale is closed. (3-C-1-3)

A borrower who successfully sells the property securing the loan using the PFS option is relieved of the mortgage obligation. The borrower shall not be pursued for deficiency judgments by either the Servicer or the Agency.

e. Borrower Requirements for a Pre-Foreclosure Sale

The PFS option may be extended to a borrower who is in default due to a verified involuntary inability to pay. 

Agency pre-approval is required for non-occupant borrowers when it is verified that the need to vacate is related to the cause of the default (job loss, transfer, divorce, death). 

A servicer may exercise discretion to accept an application from a borrower who is facing imminent default, and if the loan will be in default by the time the pre-foreclosure sale is completed. The decision must be documented in the servicing file. 

PFS is not available to borrowers who have abandoned their mortgage obligation despite their continued ability to pay. 

USDA Loss Mitigation Book: Chapter 3. Section C. Noncurable Defaults/Part 1. Pre-Foreclosure Sale:      http://www.rurdev.usda.gov/SupportDocuments/an4607.pdf