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Buy a HOME 1 Day after SHORT SALE!!! NEW!!!!
Buy a HOME 1 Day after SHORT SALE!!! NEW!!!!
Buy a HOME 1 Day after SHORT SALE!!! NEW!!!!
Buy a HOME 1 Day after SHORT SALE!!! NEW!!!!
Buy a HOME 1 Day after SHORT SALE!!! NEW!!!!
Buy a HOME 1 Day after SHORT SALE!!! NEW!!!!
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Buy a HOME 1 Day after SHORT SALE!!! NEW!!!!

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Below is information and guidance from FHA ML 09-52. Anyone dealing with a Short Sale Seller where the Seller is wishing to purchase another property will want to read this. These rules may permit …

Below is information and guidance from FHA ML 09-52. Anyone dealing with a Short Sale Seller where the Seller is wishing to purchase another property will want to read this. These rules may permit an opportunity for a seller to purchase another property without waiting the Three (3) years as required by FNMA. One of the key elements is that the seller be CURRENT on their Mortgage.

As more information is available, I will update this post. Also, remember FHA sets guidelines for loans that they will insure. Sometimes finding lenders that will accept the loans is another story.

Purpose
This mortgagee letter provides guidance to lenders and underwriters regarding borrower eligibility when

•· a previously owned property was sold for less than what was owed (short sale), or
•· there is principal write down of indebtedness that cannot be refinanced into a new mortgage (short pay off).



Effective Date
This guidance is effective immediately.

Summary - FHA Guidance on Short Sales
Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to

•· take advantage of declining market conditions, and
•· purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.

Reference: For detailed information on converting existing principal residences into rental properties, see 4155.1 4.E.4.g

Summary - Guidance on Borrowers current at the time of Short Sale
Borrowers are considered eligible for a new FHA-insured mortgage if

•· they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and
•· the proceeds from the short sale serve as payment in full.

Reference: For detailed information, see "Short Sales" at 4155.1 4.C.2.l.

Summary - Guidance on Borrowers in default at the time of Short Sale
Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Lenders may make exceptions to this rule under certain circumstances.

Reference: For detailed information, see "Short Sales", at 4155.1 4.C.2.l.

Summary - Refinancing with Short Pay Off
FHA will insure the first mortgage where the existing note holder(s) write off the amount of indebtedness that cannot be refinanced into the new mortgage due to a decline in property value and/or a reduction in income.


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  • 1. 11 1 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-8000 ASSISTANT SECRETARY FOR HOUSING- FEDERAL HOUSING COMMISSIONER Date: December 16, 2009 To: All Approved Mortgagees Mortgagee Letter 09-52 Subject Short Sales and Short Pay Offs Purpose This mortgagee letter provides guidance to lenders and underwriters regarding borrower eligibility when x a previously owned property was sold for less than what was owed (short sale), or x there is principal write down of indebtedness that cannot be refinanced into a new mortgage (short pay off). Effective Date This guidance is effective immediately. Affected Topics The topics summarized below were revised or created as a result of these changes in guidance. This Mortgagee Letter also provides the entire content of each block affected, with changes underlined. The changes will be integrated into the FHA Single Family On-Line Handbooks shortly. Continued on next page
  • 2. 22 2 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-8000 ASSISTANT SECRETARY FOR HOUSING- FEDERAL HOUSING COMMISSIONER Mortgagee Letter 09-52, Continued Summary – Borrowers are not eligible for a new FHA mortgage if they pursued a short FHA Guidance sale agreement on his or her principal residence simply to on Short Sales x take advantage of declining market conditions, and x purchase, at a reduced price, a similar or superior property within a reasonable commuting distance. Reference: For detailed information on converting existing principal residences into rental properties, see 4155.1 4.E.4.g Summary – Borrowers are considered eligible for a new FHA-insured mortgage if Guidance on Borrowers x they were current on their mortgage and other installment debts at the current at the time of the short sale of their previously owned property, and time of Short Sale x the proceeds from the short sale serve as payment in full. Reference: For detailed information, see “Short Sales” at 4155.1 4.C.2.l. Summary – Borrowers in default on their mortgage at the time of the short sale (or pre- Guidance on foreclosure sale) are not eligible for a new FHA-insured mortgage for three Borrowers in years from the date of the pre-foreclosure sale. Lenders may make exceptions default at the to this rule under certain circumstances. time of Short Sale Reference: For detailed information, see “Short Sales”, at 4155.1 4.C.2.l. Continued on next page 2
  • 3. 33 3 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-8000 ASSISTANT SECRETARY FOR HOUSING- FEDERAL HOUSING COMMISSIONER Mortgagee Letter 09-52, Continued Summary – FHA will insure the first mortgage where the existing note holder(s) write off Refinancing the amount of indebtedness that cannot be refinanced into the new mortgage with Short Pay due to a decline in property value and/or a reduction in income. Off Reference: For detailed information, see “Short Pay Offs”, at 4155.1 3.B.1.f. Questions Please address any questions about the topics addressed in this Mortgagee Letter to the FHA Call Center at 1-800-CALLFHA. Signature David H. Stevens Assistant Secretary for Housing-Federal Housing Commissioner 3
  • 4. 44 4 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-8000 ASSISTANT SECRETARY FOR HOUSING- FEDERAL HOUSING COMMISSIONER Mortgagee Letter 09-52, 4155.1 Chapter 4.C.2. New Topic (changes underlined) l. Short Sales 4155.1 4.C.2.l Borrowers are not eligible for a new FHA- insured mortgage if they pursued a Short Sales short sale agreement on his or her principal residence simply to x take advantage of declining market conditions, and x purchase at a reduced price a similar or superior property within a reasonable commuting distance. Reference: For detailed information on converting existing principal residences into rental properties, see 4155.1 4.E.4.g Borrowers Current at the time of Short Sale Borrowers are considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage x All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and x All installment debt payments for the same time period were also made within the month due. Borrowers in Default at the time of Short Sale Borrowers in default on their mortgage at the time of the short sale (or pre- foreclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Note: Borrowers who sold their property under FHA’s pre-foreclosure sale program are not eligible for a new FHA-insured mortgage from the date that FHA paid the claim associated with the pre-foreclosure sale. Continued on next page 4
  • 5. 55 5 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-8000 ASSISTANT SECRETARY FOR HOUSING- FEDERAL HOUSING COMMISSIONER Mortgagee Letter 09-52, 4155.1, Chapter 4.C.2. New Topic (changes underlined) l. Short Sales, Continued Short Sales Exceptions: Lenders may make exceptions to this rule for borrowers (continued) in default on their mortgage at the time of the short sale if x The default was due to circumstances beyond the borrower’s control (such as death of primary wage earner, long term un-insured illness, etc.), and x The review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower’s control that caused the default. Reference: For information on Short Pay Offs, see 4155.1 3.B.1.f. Mortgagee Letter 09-52, 4155.1, Chapter 3.B.1. New Topic (changes underlined) f. Short Pay Offs 4155.1 3.B.1.f. To be eligible for refinancing with a short pay off, borrowers must be current Short Pay Offs on their mortgage. Reference: For more information on mortgage payment history, see 4155.1 4.C.2.b. Continued on next page 5
  • 6. 66 6 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-8000 ASSISTANT SECRETARY FOR HOUSING- FEDERAL HOUSING COMMISSIONER Mortgagee Letter 09-52, 4155.1, Chapter 3.B.1. New Topic (Changes underlined) f. Short Pay Offs, Continued Short Pay Offs FHA will insure the first mortgage where the existing note holder(s) (continued) write off the amount of the indebtedness that cannot be refinanced into the new FHA-insured mortgage if x there is insufficient equity in the home based on its current appraised value, and/or x the borrower has experienced a reduction in income and does not have the capacity to repay the existing indebtedness against the property. For instances where the existing note holders are reluctant to write down indebtedness, a new subordinate lien may be executed by the amount which the payoff is short. For more information on new subordinate financing see 4155.1 3.B.1.c. If payments on subordinate financing are required, they must be included in the qualifying ratios unless payments have been deferred for no less than 36 months. This policy only applies to no cash-out (rate and term) refinances with short pay offs. Reference: For information on Short Sales, see 4155.1 4.C.2.l. 6

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