Ok, let’s get serious here. Last week, the Dept of HUD published Mortgagee Letter 2008-43 which details the new procedures for the FHA Pre-Foreclosure sale. The PFS is what FHA calls their Short Sale and if a seller is shorting an FHA loan, then here’s what you need to know.
>>They removed the calculation that required the property to appraise for at least 63% of the indebtedness (this is helpful because many properties have dropped below 37% of the mortgage balance).
>>HUD used to accept 82% of the appraised value as their net – now it is 88% if it sells within 30-days marketing time, 86% if it sells in 60-days, and 84% after 60 days.
>>Prior to ML 2008-43, HUD would pay zero buyer closing costs on an FHA short sale, now they will pay 1% of buyer’s closing costs if the new buyer is obtaining FHA financing.
>>They’ve increased the amount allowable to discharge junior liens up to $2,500.
>>FHA allows the seller to walk away with up to a $1,000 check at closing
Before I sign off here, I’d like to make a comment that IMO there has never been a time in the real estate industry where it has been so important to know your trade. I’ll also add that there has never been a time when knowing the answers has been so satisfying. I hope everyone is constantly learning and applying what they can to help the folks in your real estate locale and earn a profit in the process. If it was easy, everyone could do it. Since it’s not, the job is yours.
Paul,
Excellent post and agree on this being the best time to be in the business if you know the business. What do you use as your best sources to keep up with changes in mortgage and real estate? Besides Lenderama, of course!
Steve Higgins
Boulder CO Mortgages and Real Estate
http://www.BoulderLoanRanger.com
Steve, I have a variety of sources. First, I own a mortgage company with twenty originators in Florida and we all share experiences.
Second, I own a loss mitigation company and our short sale negotiators troubleshoot problems together throughout the day.
I don’t drink, but (instead) I’m an information junkie, so I read everything having to do with resolving credit issues (and other subjects).
I’d say hands down the ‘best sources’ for information on credit-related subjects is court rulings. Keep in mind, most attorneys don’t go to trial. The few that do have made case law for everyone else. Knowing how the court would likely decide a given set of circumstances lets you know what path to take, how far to push a given issue, and Lord willing how to win.
Happy New Year, Paul and Lenderama!
Great post.
If consumer hits on my title blog are any indication, people are starting to ask all the usual aka normal questions and that’s great. They’re thinking real estate again.
That’s unbelievable to think that some homes are worth 37% less than the value of their loans. That is a huge loss for banks to take. What a spillover effect for mortgage backed securities and the overall economy.
The banking industry is insolvent.
And it’s the Dept of HUD that takes the hit on a claim filed for an FHA short sale.