To participate in the program, homeowners must be willing to make a commitment to actively market their property for a period of 3 months, during which time their mortgage lender delays foreclosure action. Homeowners who successfully sell their property at near the present fair market value within the required time may receive a cash payment from FHA of up to $1,000 to help the homeowner transition to more affordable housing arrangements. If the property does not sell, the homeowner can choose to deed the property to the mortgage lender (deed-in-lieu of foreclosure).
Eligibility
The property must be owner-occupied, no “walk-a ways” or investment properties.
Exceptions: when it is verifiable that the need to vacate was related to the cause of default (job loss, transfer, divorce, death), and the subject property was not purchased as rental investment, or used as a rental for more than 18 months.
The Mortgagor must be 31 days or more delinquent at the time of the Pre-foreclosure Sale closing.
The Mortgagor must provide documentation substantiating a reduction in income or an increase in living expense, and documentation that verifies the Mortgagors need to vacate the property (if applicable).
Procedures
Homeowners who express an interest in the program or who have been identified by the lender as a qualified candidate for the program must be mailed a copy of the revised Information/Disclosure Form HUD-90035.
The homeowner must obtain a standard “As Is” FHA appraisal and give it to the lender and sales agent.
The homeowner must obtain a title search or preliminary report verifying that the title is not impaired with un-resolvable title problems or with junior liens that cannot be discharged as permitted by HUD.
When an application is accepted an Approval to Participate form is used. The date of this form becomes the starting date of the PFS participation. The Approval to Participate form must include the date by which a signed contract for sale must be obtained and minimum acceptable net sales price.The homeowner agrees:
- to show good faith in attempting to market and sell the property.
- to perform all normal property maintenance and repairs until closing of the pre-foreclosure sale.
- to list the property with a licensed real estate broker, unrelated to the Mortgagor. The listing agreement must include a specific cancellation clause in the event the terms of the sale are not acceptable to HUD.
The lender agrees to delay foreclosure to allow pursuit of the pre-foreclosure sale.
Depending on the value of the home, the sale must close within 6-8 months from the date the Mortgagee notified the Mortgagor in writing of approval to participate in the pre-foreclosure sale program.
For more information about the FHA PFS Program contact the mortgage servicer collecting your monthly mortgage payments or go to the following FHA websites:
If you have any question you may contact NSC at:
National Servicing Center
www.hud.gov/offices/hsg/sfh/nsc/nschome.cfm
E-mail: hsg-lossmit@hud.gov
1-888-297-8685
Frequently Asked Questions:
http://www.hud.gov/offices/hsg/sfh/nsc/faqnsctc.cfm
PFS Forms: http://www.hud.gov/offices/hsg/sfh/nsc/lmmltrs.cfm
What is an SFR?
The complex details involved with short sales and foreclosures are unique calls for specialized expertise.Contact an agent such as myself that has earned the Short Sale and Foreclosure Resource (SFR) Certification through the National Association of Realtors and who is committed to helping you understand your options so you can make the best possible decisions for you and your family.
If you are in a situation where your home is “underwater” due to falling home prices, you are unable to make your current mortgage payments and you are considering pursuing options such as a short sale, deed in lieu of foreclosure, strategic default or even foreclosure, there could be drawbacks that I, as a real estate agent, cannot advise you on.For your protection, I suggest that all borrowers:
- Obtain legal advice from a competent real estate lawyer regarding deficiency judgments
- Call an accountant or CPA to discuss short sale and foreclosure tax ramifications
Except for certain conditions pursuant to the Mortgage Forgiveness Debt Relief Act of 2007, be aware the I.R.S. could consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale or foreclosure will not legally pursue a borrower for the difference between the amount owed and the amount paid. In some states, this amount is known as a deficiency. A lawyer can determine whether your loan qualifies for a deficiency judgment or claim.
